Israeli Family's Buying Power: A Detailed Mortgage Calculation

A family earning a net income of 20,000 shekels per month with 600,000 shekels in savings can afford a maximum property price of approximately 1.54 million shekels. This scenario involves a mortgage of nearly 1 million shekels, resulting in a monthly repayment of 5,500 shekels, which constitutes 27.5% of their income. This repayment is below the typical bank ceiling of 35% because of existing monthly financial obligations totaling 1,500 shekels.

Of the 600,000 shekels in savings, 542,505 shekels are allocated for the down payment, while the remaining 57,495 shekels cover associated costs. These ancillary expenses, including legal fees, brokerage, appraisal, and moving, can consume about 10% of liquid assets before the buyer even receives the keys.

The article details a mortgage calculator that works backward from a manageable monthly repayment to determine the maximum mortgage amount and subsequently the affordable property price. Key inputs include net income, existing monthly commitments, savings, purchase type, expected interest rate, mortgage term, and repayment ratio. The calculator also accounts for different financing limits based on property type: 75% for a primary residence, 70% for those upgrading, and 50% for additional properties.

In the example, the savings allow for a 65% financing ratio, below the threshold, making the monthly repayment the limiting factor. However, for families with less savings, the financing ratio becomes the constraint. The current interest rate used in the calculation is 4.4%, close to the market average. Small changes in interest rates can significantly alter the affordable property price, suggesting users run calculations with both the bank's quoted rate and a quarter-percent increase.

Purchase tax is zero in this example as it's a primary residence below the exemption threshold. Buying an additional property at the same price would incur substantial purchase tax. Extending the mortgage term from 25 to 30 years increases the affordable property price but also adds tens of thousands of shekels in cumulative interest. The calculation does not include costs for renovations, furnishings, or moving, which occur when liquid funds are depleted.