Purchasing an investment property is fundamentally different from buying a home for residence, both in terms of financial objectives and banking regulations. While for a first home you can receive up to 75% financing, the Bank of Israel limits the financing percentage for a second property (investment property) to only 50% of the property value. This restriction requires investors to come with significantly more equity capital or find creative financing solutions.
When we approach mortgage consulting for investors, the main goal is not necessarily to "finish with the mortgage as quickly as possible," but to maximize return on investment (ROI). Sometimes, a longer mortgage with lower monthly payments will allow the rental income to fully cover the loan, thereby creating an asset that finances itself ("income-generating asset").
One of the biggest challenges for investors is raising the required equity capital (50% of the purchased property value). This is where a powerful tool that many are unaware of comes into play: leveraging an existing property. If you own a residential property and the mortgage on it is less than 50% of its value (or there's no mortgage on it at all), you can take an additional mortgage on the existing property.
In the process of mortgage consulting for investors, we examine all variables to ensure the deal will be profitable and secure.
Will the expected rental income cover the mortgage payments? In many cases we prefer index-linked tracks with low initial payments, or "grace" tracks (interest-only payments) for a certain period, to ensure the property doesn't become a monthly burden on your bank account.
Purchasing a second apartment requires payment of purchase tax (from the first shekel). This is a significant amount that must be taken into account in the overall calculation of transaction costs and the required mortgage amount. Improper planning of purchase tax can turn a good deal into a losing transaction.
Many investors plan to sell the property ("exit") after several years. Therefore, it's critical to build a mortgage portfolio that allows early repayment without high exit penalties. The right combination of prime tracks and variable tracks is key to this flexibility.
Banks view investors as a different type of client. The risks and opportunities are different from those of single apartment buyers. An expert mortgage consultant who understands the investment world will know how to build your financial portfolio in a way that serves your interests, not the bank's.
The consultation process includes an in-depth analysis of financial capabilities, building a financing strategy tailored to the nature of the investment (long-term or short-term), and conducting tough negotiations with banks to achieve the best interest rates. Saving tenths of a percent in interest can accumulate to savings of tens or even hundreds of thousands of shekels over the life of the loan, dramatically improving your net return.
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