Mortgage Tips for Surviving Covid-19 in Israel
Aaron Krasner, Mortgage Israel Ltd.
Covid-19 has caused a significant financial challenge to households throughout the world, and sadly, Israel is no exception to this phenomenon. Your mortgage repayment is usually the biggest line item in your monthly budget, and your home is usually your largest financial asset. So focusing on streamlining and improving this crucial area can really help you and your family get through this unpredictable time.
Here are 5 mortgage tips to help get through Covid-19 1. Keep your eyes open for deals It’s a fact of life that a great crisis produces great opportunity. If you are looking to buy property in Israel now may be the perfect time to find bargain prices. Although prices overall have only dropped slightly over the Corona period, the crucial point is that deal volume is very significantly down. As a result, realtors report that the number of “metzias’’ - homes sold significantly undervalue - has increased, as desperate sellers are more likely to accept a lower price when pushed. 2. Borrow more - hold cash When buying a home in Israel, many people have a healthy desire to keep their mortgage borrowing as low as possible. However, during uncertain financial times, it is unwise to leave yourself without access to significant amounts of liquid cash. Consider reducing your down-payment and take a slightly larger mortgage at low rates. This way you keep yourself flush with an emergency cash reserve, just in case!
3. Put your mortgage repayment on hold If you already own a home and can afford to keep paying your mortgage during this time, then keep doing so! But if you are struggling to maintain your monthly repayments or are taking out short-term loans to help get through the month, you should strongly consider putting your mortgage on hold. Mortgage repayments can be frozen for up to 6 months at a time, with virtually no questions asked by the banks to verify how necessary this is for you. During this period, you can either pay just interest but not capital, or not pay anything at all! A word of warning - This is not a free lunch! All those repayments, plus interest for delaying the payment, will eventually need to be repaid to the bank. But these repayments are spread over the remaining years of the loan at the same interest rate as your current mortgage, so this is an excellent tool for keeping cash-flow positive during hard times.
4. Refinance your loan Now might be the best time to refinance your mortgage! Interest rates in Israel are almost as low as they have ever been, so locking in now at a fixed rate may really help you to get through the turbulent months and years to come. Refinancing is not just about getting low rates, you can also adjust the number of years of the loan. Increasing the loan term will lower your monthly repayment, helping you get through the month. Decreasing the term loan will lower your overall pay-back to the bank, potentially saving you hundreds of thousands of shekels! 5. If you need to borrow - maybe borrow against your home! If you are in need of a significant loan, instead of paying 8-12% on a 5-year unsecured loan from the bank (average repayment on 100k NIS = 2000 NIS), consider securing this loan against your home at 3-5% interest for up to 30 years (average repayment on 100k NIS = 500 NIS). Banks can now lend up to 70% loan-to-value during Covid-19. Let’s keep hoping for a quick end to this pandemic, and I wish everyone much physical and financial health!
Aaron Krasner is a mortgage broker at Mortgage Israel.
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