How To Refinance Only The Costly Part Of Your Mortgage In Israel
As Israel faces record-high interest rates and inflation eroding savings, refinancing mortgages has become a key financial topic. In 2025 alone, about 69,000 mortgages totaling 43.6 billion shekels were refinanced, yet with over 660 billion shekels in outstanding mortgages, many families could still benefit from refinancing. Financial advisor Tomer Veron, author and podcast host, explains that refinancing means taking a new mortgage under current terms to replace an old one, often improving rates, repayment periods, or monthly payments.
Veron highlights common misconceptions that prevent borrowers from refinancing. First, many believe their mortgage rates from 2020-2021 remain low, but variable-rate loans include a fixed bank margin added to the market cost of money, which has risen sharply. For example, a loan initially at 3% interest (0% market cost plus 3% margin) can now effectively cost 7% due to market changes, making refinancing attractive. About 20% of mortgages taken during the heated 2020-2021 real estate market were variable-rate linked to the consumer price index, often resetting every five years.
Second, mortgages often consist of multiple loans with different rates and terms. Borrowers can refinance selectively, adjusting only the costly parts without losing favorable fixed-rate segments. This can include splitting the mortgage between banks via secondary liens to foster competition.
Third, the idea that "most interest has already been paid" is misleading. Mortgage payments always include principal and interest simultaneously, so refinancing decisions should focus on future savings, risk reduction, and payment suitability rather than past payments. Veron advises comparing monthly payments, interest saved over 5-10 years, and total cost until loan maturity. Refinancing is not always beneficial and should align with personal financial goals and life plans, not just headline interest rate drops.
Ultimately, a good mortgage fits the borrower's life and priorities, balancing savings with manageable payments and other financial needs like investments or family expenses. Refinancing can also serve as a tool to better tailor the mortgage to current circumstances, not just reduce rates.
The article is part of a new series simplifying complex financial topics for Israeli readers amid changing economic conditions.
