Written and professionally reviewed by the Ailon Financing Solutions team
The basic rule
The bank does not fully finance an apartment. He will always demand that you bring some of the money yourself, and this is what is called equity.
The regulation in Israel sets a ceiling for the mortgage according to the type of buyer:
| The type of buyer | Maximum mortgage | Equity required |
|---|---|---|
| first apartment | 75% of the value of the property | 25% or more |
| Housing improvers | 70% of the value of the property | 30% or more |
| Investment property | 50% of the value of the property | 50% or more |
Please note: the percentages are calculated according to the value of the property and not according to the contract price. Usually these are the same, but not always, and this difference is exactly what makes the price of a tenant a special case.
Mechir LaMishtaken: the big exception
Tenant price winners buy an apartment below the market price. The bank calculates the mortgage according to The value of the property in the free market, not according to the discounted price you pay.
Let's say an apartment whose contract price is NIS 900,000, and an appraiser estimates its market value at NIS 1,200,000. The possible mortgage is 75% of the market value, that is, up to NIS 900,000.
The difference between the contract price and the seller's value may reduce the equity capital required in certain plans, subject to valid instructions and bank policy. Do not rely on a uniform amount: check the price of the apartment, the rules of the program, assessments, possible grants and unfunded expenses.
What is considered equity?
The bank recognizes the following sources:
Liquid savings — checking, deposits, savings plans.
Continuing education fund — leakage or can be released. One of the most common sources.
Provident funds and pension funds — within limits, and sometimes with tax consequences.
A gift from parents or relatives — Completely legitimate, but requires proof of origin and usually a signed gift letter.
Proceeds from the sale of property — Previous apartment, car, other property.
Encumbrance of an existing property — Property owned by you or owned by family members who agree to pledge.
whatever not to do
Do not take a loan a week before the application. The bank sees the account statements. A loan entered the day before submitting the application looks exactly like what it is, and it hurts twice: both as a commitment that reduces the ability to repay, and also the credibility of the case.
Don't forget the associated costs. The equity is not only the difference between the price of the apartment and the mortgage. Need to add:
- Purchase tax, if applicable
- Attorney's fees
- Brokerage fees
- assessments
- Fees and registration
- Furniture and transition
In practice, it is tens of thousands of shekels more. Those who plan exactly the minimum find themselves stressed at exactly the wrong moment.
Do not empty the account to zero. A bank that sees that after the purchase you have nothing left treats it as a risk. Equally important: you need a security cushion for life itself.
How to increase equity
If you lack, there are some real directions.
Release of savings channels. A liquidity training fund is the cheapest source, because it has no interest and no impact on the repayment ratio.
property sale. Second car, inherited property, business equipment.
Family assistance. A gift is better than a loan, because a gift is not counted as an obligation.
Encumbrance of the parents' property. Allows you to get higher financing without spending cash. Requires full agreement and understanding of the risk for both parties.
The gift is planned. Sometimes the right answer is to wait six months, settle the account and save in an orderly manner. The bank sees a pattern of regular savings and prices it favorably.
The mistake that costs the most
People focus on the question "how much do I need" and miss the more important question: Where does the money come from and how does it look in the file?.
Two people with the same NIS 400,000 can get completely different answers from the bank. One saved them over the years in a regular pattern, the other added them from three loans in the last month. The amount is the same, the risk in the eyes of the bank is completely different.
The bottom line
Equity is not just a number. is your financial story as the bank reads it.
Before you run to save more, it's worth checking how much you really need, from which sources you can supplement, and what each source costs you in relation to the return. Sometimes it turns out that you are closer than you thought.
Think the full picture
Check the possible financing rate bEquity calculator and add the associated expenses with the help of Apartment purchase cost calculator. A calculator result is not a credit approval.
