New Bank Rules to Reshape Mortgage Calculations for Israeli Borrowers

Starting October 1st, Israeli banks will implement new regulations from the Bank of Israel affecting how mortgage applications are assessed. The changes require banks to consider the repayment of a new loan alongside existing loans secured by the same property. This could lead to lower financing amounts, altered terms, or outright rejection for some borrowers.

The mortgage market is also expanding beyond traditional banks, with insurance companies and non-bank credit firms increasing their presence. This diversification raises questions for borrowers about loan suitability, long-term costs, and hidden commitments within monthly payments.

The core change involves a revised calculation of the debt-to-income ratio, which now includes previous loans secured by the same property if their remaining repayment period exceeds 18 months. While the maximum repayment ratio remains at 50%, a higher ratio may trigger a 100% risk weighting for the loan, potentially impacting credit terms. Experts note that while these thresholds aren't new, the inclusion of prior loans might cause more borrowers to exceed them.

Industry professionals advise borrowers to compare offers from banks and non-bank lenders, even after receiving bank approval. Hadar Tamarkin, CEO of Mikal Mortgage, emphasizes that bank approval only signifies feasibility, not necessarily the best financial structure for the family. Judith Galcof Porat, Deputy CEO of Bonus Finance Credit, highlights the importance of personalized assessments for self-employed individuals, investors, and those consolidating debts, stressing that loan approval is just the first step in a long-term financial commitment.

Legal experts like Shai Botbol of BGR Law Firm urge borrowers to thoroughly review all financing documents, especially for second-lien loans. Understanding the combined repayment obligations, maturity dates, collateral, and consequences of non-compliance is crucial for making informed decisions that borrowers can sustain over time.