Mortgage financing 101

Preparing documents to apply for mortgage financing can be simplified by keeping good records. You’ll need to assemble three years of tax returns, bank statements, a credit report and credit card statements from all countries you call home. Doing so helps you know exactly how much you can afford on capital – the down payment – and how much you can pay back on the bank loan.

When purchasing an existing property or constructing a new one, Israeli banks typically provide mortgage financing up to 75% of the value of the home. The emphasis here is on “value.” The bank can turn you down for any number of reasons.

They will send their own appraiser to inspect your property before releasing the mortgage. Let’s say the buyer is selling for NIS 2 million, but the appraisal comes in at NIS 1.5m. You’re out of luck. You’ll receive NIS 1.125m. and not the NIS 1.5m. you might have hoped for. And, as one lawyer was quick to point out, once you sign a contract, you’re liable to pay for the property or incur a stiff penalty. A sobering thought.

How does one even begin to prepare for that eventuality? Ideally, one real estate agent friend advises to be conservative in what you buy. Prepare closer to 50% of the down payment to ward off nasty surprises.