Taking out a mortgage is the biggest financial transaction of your life. A small mistake in the planning stage can cost you hundreds of thousands of shekels over the years. In this article, we'll review the main pitfalls and how professional mortgage consulting can save you from them.
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Most people take out a mortgage once or twice in their lifetime. In contrast, banks conduct such transactions thousands of times a day. These knowledge gaps create a situation where borrowers approach the deal from a distinctly disadvantaged position. Without objective mortgage consulting, it's very easy to fall into marketing traps that seem attractive in the short term but are destructive in the long run.
Many think a mortgage is a uniform off-the-shelf product, but in reality it's a "suit" that needs to be tailored precisely to your measurements. When we approach the process of first-time home buyer mortgage consulting, we repeatedly encounter the same basic errors that keep repeating themselves. Here's the complete list of mistakes you should know before signing at the bank.
This is the most common mistake. Many borrowers chase the lowest interest rate without understanding the implications of indexation tracks. A low initial interest rate in an index-linked track may prove very expensive down the road when the principal inflates and monthly payments skyrocket. The right mix is more important than a specific interest rate.
"I've been with this bank since age 16, they'll surely give me a good deal." Wrong! The bank is a business whose goal is to maximize profits. A captive customer is the ideal customer for the bank. You must conduct a comprehensive market survey among all banks and negotiate. Often, a competing bank will offer significantly better terms to recruit you as new customers.
Mortgages are taken for 20 or 30 years. Will your income and expenses remain the same? Family expansion, education expenses, or career changes must be taken into account. Proper planning must include "exit points" and flexibility for changes, an option sometimes forgotten when refinancing and improving terms or taking a new mortgage.
Life insurance, property insurance, file opening fees, appraisals, attorney fees... all of these add up to significant amounts. Sometimes the monthly payment seems reasonable, but with the addition of insurance it becomes financially strangling. It's important to calculate the "total monthly payment" and not just the payment to the bank.
Relying on the bank clerk as an advisor is an inherent conflict of interest. The bank clerk looks out for the bank, a private mortgage consultant looks out for you. The savings achieved through building the right mix and professional negotiation exceed the cost of the consulting itself by tens of times.
The secret to a good mortgage is balance. Balance between stable tracks (fixed interest) and cheap but volatile tracks (prime), and balance between current monthly payments and future repayment capacity.
When we at Ariel Achon provide mortgage consulting, we first build a financial profile of the client. We check not only how much you earn today, but what your plans are for the future. Is a sum of money expected to be released (continuing education fund)? Are you planning to change apartments in 5 years? These questions are critical for choosing the right tracks.
Whether you're facing your first home purchase or considering mortgage refinancing, professional evaluation can save you heartache and significant money. Our team is here to ensure you're making the right move.