Written and professionally reviewed by the Ailon Financing Solutions team
Delaying payment is not delaying a decision
A 20/80 deal, and sometimes 10/90 or a similar structure, allows you to pay a small part at the signing and most of the proceeds close to delivery. The advantage is time to accumulate capital or sell an existing property. The risk is that the purchase obligation is created today, while the financing is reassessed in the future.
Do a financing check as if the balance is being paid today, and add a scenario where the interest rate is higher, the income is lower, or the appraisal value is lower than expected. Calculate a possible linkage bConstruction input index calculator and check the future balance also b20/80 deal calculator.
How to plan a mortgage for an apartment from a contractor
Proper planning is done at two times. Before signing, they check if the deal fits the financial capacity even in a conservative scenario. Close to the actual payment date, a new inspection is performed, an up-to-date approval in principle is received and bank offers are compared based on the same amount, period and mix.
The initial approval in principle is an important feasibility study, but it is not an indefinite commitment. Until delivery, income, liabilities, credit data, interest, property value and bank policy may change. Therefore, a long-term deal should not be built only on the approval given on the day of signing.
The monthly repayment in different interest scenarios can be checked atThe mortgage calculator and inInterest rate change calculator. It is recommended to also check what will happen if the refund goes up, and not just whether the current scenario passes.
The five costs that need to be included in the budget
- The price of the apartment and connections: It must be checked in the contract which part of the consideration is attached, to which index, from which date to which date.
- Purchase tax: Liability depends on the buyer's classification and the circumstances of the transaction. You can get an estimate bPurchase tax calculator and verify it against the official simulator.
- Legal and professional costs: A lawyer on behalf of the buyer, appraisals, records and sometimes additional costs.
- Upgrades, connections and switching: Kitchen, air conditioning, lighting, furniture, infrastructure connections, transition and overlapping period between existing and new housing.
- Financing cost: Interest, insurance and mediation cost if there is a gap between the sale of an existing property and the payment to the contractor.
Center the image inThe full cost calculator for buying an apartment. A budget that only contains the contract price may show free equity that is higher than reality.
Comparison between a tiered payment and a 20/80 deal
| carrier | Gradual payment during construction | Deferring most payment for delivery |
|---|---|---|
| Flow at the beginning | Requires capital or early financing withdrawals | Temporarily eases the flow |
| Certainty in interest | Some of the conditions can be determined earlier | Most financing terms are determined in the future |
| linkage | Depends on balances and contract | A large balance may be exposed depending on the contract and law |
| Assessment risk | Will be reviewed as funding progresses | May be discovered near delivery |
| flexibility | The commitments are spread along the way | A large amount is required at one time |
There is no structure that is good for everyone. The choice depends on the equity, the certainty of the income, the date of sale of an existing property, the terms of the contract and the total price of each alternative.
Checks before signing
- Make sure the payment schedule matches the sources of money and their availability dates.
- Check what is the maximum amount you can finance even if the interest rate or repayment increases.
- Leave a reserve for the difference in valuations, for linkage and expenses that are not included in the contract price.
- Check bank escort, insurance, milestones, delivery date and compensation for delay.
- Make sure that each payment is made in a way that is appropriate for the project's security mechanism.
- Ask a lawyer to check the contract, the payment schedule and the linkage formula on your behalf.
- Do not rely on an expectation to sell a property at a certain price without an alternative scenario.
can be produced Personal list of documents for a mortgage and perform Mortgage readiness diagnosis before proceeding to commit.
A simple test scenario
Let's say the price of the apartment is NIS 2,000,000, the first payment is NIS 400,000 and the balance is paid upon delivery. The test does not end with the question of whether there is NIS 400,000 today. You need to check what the source of the balance will be, how much mortgage will be possible according to the future data and what happens if additional equity is required.
Build at least three scenarios: base, conservative and extreme. In the conservative scenario, they raised the interest rate, reduced the value of the appraisals and added unexpected expenses. If the deal depends on all the underlying assumptions being met exactly, the margin of safety is probably too small.
How Ailon helps in planning
Check bank support, guarantees, milestones, delivery date and compensation. The lawyer on your behalf should go over the contract and not be satisfied with the contractor's documents. The financing structure can be mapped inThe initial consultation.
The financial review does not replace legal advice or appraisals. It coordinates the payment schedule, capital sources, interest scenarios, repayment ratio and reserves so that the decision is made based on numbers and not on the basis of the first payment only.
