Israeli Homebuyers Face Hurdles Despite Lower Interest Rates

Despite three consecutive interest rate cuts by the Bank of Israel, bringing the rate to 3.25% from 4.5% a year ago, purchasing a home in Israel remains challenging, particularly for those earning around NIS 20,000 net per month. The primary hurdles for mortgage approval are the required down payment and the monthly repayment amount.

A couple with NIS 500,000 in savings might qualify for a mortgage up to four times their savings, allowing them to consider a property costing NIS 2 million. This would necessitate a NIS 1.5 million mortgage with a monthly repayment of approximately NIS 7,500. However, banks typically require a monthly income of around NIS 25,000 to approve such a repayment, or allow up to 35% of net income, which for this couple would mean needing NIS 21,428 net monthly.

If the bank's red line is the 35% repayment limit, the couple might need to increase their down payment. If parents can provide an additional NIS 100,000, the mortgage would decrease to NIS 1.4 million, lowering the monthly payment to NIS 7,000. This could make the mortgage approvable on a NIS 20,000 net salary. However, banks often factor in other loans, like a personal loan taken by the parents on behalf of the couple, which could reduce the approved mortgage amount and lead to denial.

Additional complications arise if one partner pays alimony or has recently left a job. The article concludes that beyond net salary, a substantial down payment is crucial. Many deals fall through due to insufficient funds, forcing buyers to either purchase cheaper homes or secure the difference from family. A NIS 2 million apartment is below the Israeli average of NIS 2.4 million. To buy an average-priced home with a 30% down payment (NIS 720,000), requiring a NIS 1.68 million mortgage with an NIS 8,400 monthly payment, a couple would need a net income of NIS 28,000, a level of savings and income without other financial obligations that is rare.