Written and professionally reviewed by the Ailon Financing Solutions team
The question everyone is asking is wrong
"How much mortgage can I take out?" It's a natural question, but she misses.
The bank does not ask how much you want. He asks one question: What are the chances that you will return it?. And to answer it he looks at one number above all others, the return ratio.
How is it calculated?
The return ratio is a simple division:
The monthly repayment on all obligations ÷ the monthly disposable income
Example: A couple with a joint net income of NIS 22,000. They have a NIS 1,800 repayment car loan. The planned mortgage will require a repayment of NIS 6,200.
Total refund: NIS 8,000. Return ratio: about 36 percent.
The Bank of Israel order states that a bank will not approve a housing loan when the repayment ratio exceeds 50 percent. The Bank of Israel notes that in a significant part of the loans the ratio is 30 to 40 percent. The bank may set a lower threshold according to the characteristics of the portfolio and the risk.
The three ceilings that work at the same time
The amount of the mortgage is determined not by one block but by three, and the lowest of them determines:
the funding ceiling. Up to 75 percent for a single apartment, up to 70 percent for a replacement apartment and up to 50 percent for an investment apartment, subject to the classification and the value of the seller according to the directive.
the return ratio. How much monthly repayment you can afford according to your income.
Your equity. How much money do you actually have to bring?
Many people focus only on the first and find out too late that the second is the one that blocks them.
What is considered income?
Not everything that goes into the account counts.
Fully recognized: Fixed base salary, fixed government allowances, pension.
Partially sold: Overtime, bonuses, commissions, rent from another property. The bank capitalizes them according to an average and sometimes recognizes only a part of them.
Not commonly known: Disposable income, gifts, tax refunds.
For the self-employed: The income is determined by the assessments, not by the withdrawals from the account. A self-employed person who continues a little of the business but reports a high profit will be examined according to the reported profit.
What counts as a commitment
Here people are surprised.
- Bank and non-bank loans
- Car leasing and financing
- Existing mortgages
- foods
- Credit facilities are used regularly
- Sometimes also guarantees you gave to others
A permanent minus in the checking account is not just a liability. It is a behavioral sign, and the bank reads it as such.
How do you increase the amount?
There are real ways, and each with a price.
Closing commitments. the most direct way. A NIS 2,000 repayment loan that is closed frees up space for a much larger mortgage. If you have money on the side, sometimes it is better to close a loan with it than to increase the equity.
extension of the period. A 30-year mortgage will require a lower monthly repayment than a 20-year mortgage, therefore allowing for a higher amount. The price: much more interest along the way.
Another loan addition. A parent or family member who joins increases the recognized income. The price: he bears full responsibility, and this affects his ability to finance in the future.
Arrange the flow in advance. Three to six months of an arranged account, without a minus, with a regular savings pattern, change the picture the bank sees.
The dangerous mistake
The ceiling that the bank approves is not a recommendation. She is the border from there onwards the bank feeling uncomfortable
Many families take the maximum, then discover that life does not stop: education, a car that breaks down, a year with a lower income. A mortgage taken on the edge leaves no room to breathe.
The correct test is not "how much will I be approved for" but "what monthly repayment can I live with comfortably even in a less good year".
Why does it have to do with the mix?
The return ratio determines how much you will receive. The mix determines how much you will return in total.
There is no fixed cost ratio that differentiates a standard mix from a good mix. The cost depends on the interest rate, the period, the routes and the linkage. Compare mixes for the same amount and period and check the repayment, the total payment, the balance along the way and the exposure to changes.
It also works the other way: the right mix can lower the monthly repayment, thus improving the repayment ratio and opening the door to a higher amount.
The bottom line
The bank calculates risk, not desires. If you want a bigger mortgage, the way is not to ask harder but to look better on paper.
Closing one loan, three months of a clean account, and an orderly presentation of income. These are things that can be done, and they are worth more than any conversation with the clerk.
Check a personal scenario bMaximum mortgage calculator and inThe mortgage calculator. The result is an estimate and not a credit approval.
