When young couples or home upgraders approach the process of buying a home, the main focus is usually on the property price itself and the required mortgage amount. This is a common mistake that can lead to a significant budget shortfall. In practice, the additional transaction expenses can reach tens or even hundreds of thousands of shekels, often adding 5% to 10% to the original home price.
In the mortgage consulting process, one of the critical steps is building a complete financial profile of the client. An experienced mortgage advisor doesn't just look at monthly repayment capacity, but examines the real equity remaining to the client after deducting all additional expenses. Ignoring these expenses can lead to a situation where you don't have enough equity to sign the contract or make the first payment to the contractor.
Here's a breakdown of the main costs you'll encounter on your way to homeownership, beyond the property price itself:
An attorney accompanies the transaction from start to finish, including property inspection, contract drafting, and land registry registration. The standard fee usually ranges between 0.5% to 1.5% of the property value plus VAT. When purchasing from a contractor, the law limits the contractor's attorney fee to a fixed amount (about 5,000 NIS plus VAT), but you'll still need your own attorney.
The bank requires an appraiser's evaluation to ensure the property value matches the mortgage amount. The cost of an appraiser from the bank's list usually ranges between 600 to 1,000 NIS for a standard property. If you decide to bring a private appraiser before signing the contract (highly recommended!), the cost may be higher, but it can save you from purchasing a problematic property.
If you used a broker to find the property, the standard cost is 2% of the property price plus VAT. This is a very significant expense to factor into your equity calculation, as the bank doesn't finance brokerage fees as part of the mortgage.
The tax amount depends on the property value and your status (single home, home upgraders, or investors). For a first home, there's an exemption up to a certain ceiling, but above it you pay graduated tax. It's important to check the current tax brackets with the Tax Authority before purchase.
Opening a mortgage file costs 0.25% of the loan amount (negotiable). Additionally, you must factor in the costs of life insurance and building insurance, which are mandatory conditions for obtaining the mortgage. These costs are paid monthly throughout the life of the loan.
When purchasing an off-plan property from a contractor, the remaining unpaid balance is linked to the construction input index. Increases in this index can add tens of thousands of shekels to the final property price until you receive the keys. With proper mortgage consulting, you can plan the payment schedule to minimize this exposure.
Many think a mortgage advisor only deals with interest rates with the bank, but their role is much broader. An essential part of the mortgage consulting process is building a comprehensive financial plan that takes into account all the components we mentioned above.
When we build a mortgage mix, we ensure you have enough liquidity to pay all additional expenses without going into bank overdrafts or taking expensive last-minute loans. Proper planning can include advancing payments to the contractor to prevent index increases, negotiating file opening fees, and adjusting monthly repayments to allow you to maintain a decent standard of living even after moving to the new home.
Additionally, a professional advisor will know how to refer you to reliable professionals (appraisers, attorneys, insurance agents) who will provide you with quality service at fair prices, which can save you thousands of additional shekels along the way.
Don't let additional expenses surprise you. Let's build a smart mortgage plan that takes the full picture into account and saves you money.
Schedule a consultation meeting