Israeli Families Sit on Millions in Home Equity, Unsure How to Use It

Many Israeli families find themselves in a peculiar financial situation: after decades of mortgage payments and home improvements, their primary residence is now worth millions of shekels, yet this equity remains largely inaccessible for daily needs or future investments. This paradox becomes particularly relevant for families between the ages of 45 and 55, when mortgages are smaller, incomes are stable, and future expenses like children's education, weddings, and parents' retirement begin to loom.

FEMA Mortgages suggests that instead of merely asking "How much is our house worth?" families should consider "What do we want this equity to do for us in the next ten to twenty years?" This perspective encourages viewing the family home not as an endpoint, but as a potential asset for future financial planning. For instance, a family living in a 3 million shekel home with a small remaining mortgage and stable income could consider leveraging their equity to acquire a second property.

This second property could be rented out, sold later, provide income in retirement, or assist a child. FEMA frames this as a shift from borrowing out of immediate need to financing as part of long-term capital planning. Making such decisions when children are younger is often less stressful than facing an immediate need for funds, such as for a wedding.

A significant hurdle is that traditional bank loans for investment properties typically require a 50% down payment. This means a 2 million shekel investment property would need 1 million shekels in equity. While a family might not have that much in liquid assets, they could have substantial equity in their primary residence. FEMA analyzes the entire financial picture, including existing assets, debts, income, and liabilities, to assess the feasibility of higher financing ratios, up to 80% in suitable cases, subject to underwriting.

FEMA emphasizes that acquiring a second property should not increase current financial stress. The goal is not aggressive leveraging but a calculated use of accumulated capital. While borrowing against one's home requires careful consideration of repayment ability and transaction specifics, completely avoiding leveraging the primary residence's equity may also not be the optimal solution for future planning. The organization aims to help families understand their full financial picture, enabling informed decisions about how their home equity can best serve their long-term goals.