A comprehensive guide for first-time home buyers and housing upgraders: How to maximize the benefits you're entitled to from the state and save tens of thousands of shekels on mortgage payments.
Check Your Eligibility
Many of our clients who come to us for mortgage consulting ask about "eligibility loans." This is actually a loan provided by the state (Ministry of Construction and Housing) through mortgage banks, under predefined preferential terms. The purpose of the loan is to assist various populations, especially young couples purchasing their first home, in acquiring their own apartment.
The loan amount is determined according to a "scoring" system. The higher the cumulative score, the larger the eligibility amount. The score is calculated based on various criteria such as the borrowers' age, number of years married, number of siblings (of both spouses), military or national service, and more. For home buyers in national priority areas, there are significant additions to the eligibility amount.
It's important to understand: eligibility funds are part of the overall mortgage mix. They are not given as a grant (in most cases), but as a loan that must be repaid, however its terms may be more attractive than certain banking alternatives, so it's important to examine it as part of the mortgage consulting process for a first home.
Why should you insist on obtaining an eligibility certificate? Here are four significant financial reasons
The interest rate in the eligibility track is usually lower than the average market rate for similar tracks. The interest rate is index-linked but fixed (or changes at very long intervals), which provides some certainty regarding the monthly repayment amount over time. Currently, the interest rate stands at 3% or 0.5% below the average rate (whichever is lower).
This is perhaps the greatest advantage. In regular bank mortgages, early repayment can incur heavy penalties ("discount fees"). In the eligibility track, you are exempt from paying this penalty at any time. This provides tremendous flexibility for those planning to refinance their mortgage or pay off part of it in the future.
Since this involves government funds, borrowers enjoy a certain safety net. In cases of unemployment, illness, or financial difficulties, there is a special committee at the Ministry of Housing that can be approached to request relief in repayments or debt restructuring, a process that is much more complex and difficult with the commercial banking system.
Combining eligibility funds in a mortgage may improve conditions in other tracks as well. Banks view borrowers eligible for government assistance as more stable customers in some cases, and sometimes the very existence of eligibility allows for greater flexibility in financing percentages or loan terms.
The process today is digital and relatively simple, but requires accuracy in submitting documents to maximize the score you're entitled to. Here are the main steps:
This is the million-dollar question. Despite the clear advantages we mentioned, the answer is not unambiguous. Sometimes, in a very low interest rate environment, banks may offer cheaper tracks than the government track linked to the index. Additionally, the eligibility loan is usually for shorter periods (up to 30 years, but often less), which may increase the monthly repayment.
This is exactly where professional mortgage consulting comes into play. Our role is to examine the complete mortgage mix, compare alternatives, and check whether combining eligibility actually reduces the total cost of the mortgage or provides critical future flexibility. At "Mortgage in Pajamas," we perform precise simulations that include the construction input index and inflation forecasts to make the most financially sound decision for you.
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