Israeli Housing Calculator Shows Affordability Limits for Average Earners
A family earning a net income of 20,000 shekels per month with 600,000 shekels in savings can afford a maximum apartment price of approximately 1.54 million shekels. This scenario involves a mortgage of nearly 1 million shekels, resulting in a monthly repayment of about 5,500 shekels, which constitutes 27.5% of their income. This repayment is below the bank's typical 35% ceiling due to existing monthly financial commitments totaling 1,500 shekels.
The 600,000 shekel down payment is allocated with 542,505 shekels for the apartment's advance payment and 57,495 shekels for associated costs. These ancillary expenses, including legal fees, brokerage, appraisal, and moving, consume roughly 10% of the liquid capital before the buyer even receives the keys.
The article details a mortgage calculator that works backward from a manageable monthly repayment to determine the mortgage amount and subsequently the maximum apartment price. It requires input on net income, monthly obligations, savings, purchase type, expected interest rate, mortgage term, and repayment ratio. The calculator also considers loan-to-value ratios, with limits of 75% for a primary residence, 70% for those upgrading, and 50% for additional properties.
An interest rate of 4.4% was used in the example, close to the market average. Fluctuations of even a quarter percent in interest rates can alter the affordable apartment price by tens of thousands of shekels. The calculation also accounts for purchase tax, which is zero for a first-time buyer below a certain price threshold but can be substantial for additional property purchases.
Extending the mortgage term from 25 to 30 years allows for a more expensive apartment but increases the total interest paid over time. The calculator does not include costs for renovations, furnishings, or moving, which are often incurred when liquid funds are depleted. The Bank of Israel's current interest rate is 3.25% with a prime rate of 4.75%, following recent reductions, with the next monetary policy decision expected in October.
