Before diving into loan tracks and interest rates, you need to understand the numbers. The complete guide to planning the down payment required for purchasing an apartment, and how to avoid common mistakes on the way to getting your keys.
When we approach taking a mortgage, the bank looks at two main parameters: our monthly repayment capacity, and the down payment we bring to the transaction. Down payment is essentially the amount of money you pay from your own pocket for the apartment, before the bank completes the balance through the mortgage loan.
As part of the mortgage consultation process, the first step is always analyzing the existing down payment. The reason for this is that the Bank of Israel has set strict rules regarding the maximum financing percentages that banks are allowed to provide. Without sufficient down payment, it's impossible to receive preliminary mortgage approval, so proper planning of financing sources is critical even before signing a purchase contract.
For first-time home buyers (those without housing), the Bank of Israel allows financing of up to 75% of the property value. This means you must bring down payment of at least 25% of the apartment price.
Example: For an apartment worth 2 million ₪, a down payment of 500,000 ₪ is required.
Those who sell an existing apartment and buy another one in its place are entitled to financing of up to 70% of the new property value. In this case, the required down payment is 30%.
There's an obligation to sell the old apartment within a specified timeframe (usually 18 months).
For a second apartment and beyond (investment property), the bank may approve financing of only up to 50%. This means you must bring half of the property value from home.
This is a high entry threshold that requires precise financial planning.
Many ask themselves: "Where do I get the initial money?". This is one of the biggest challenges for young couples in Israel. As part of first-time home mortgage consultation, we map out all possible sources:
A critical point that many are unaware of is that the bank calculates the financing percentage based on the lower of the two: the contract price or the appraiser's valuation.
If you purchased an apartment for 2 million NIS, but the bank's appraiser valued it at only 1.8 million NIS, the bank will give you 75% of the 1.8 million. The implication? You'll have a 'gap' in your budget that you need to cover immediately from your own equity.
Mortgage advisor tip: In borderline cases or in areas where prices are rising rapidly, it's recommended to conduct an 'early appraisal' before signing the contract, so you know exactly how much mortgage you can get and avoid unpleasant surprises.
The mortgage loan is the biggest commitment of your life. Improper planning of equity can drag you into supplementary loans at very high interest rates that will burden your monthly payments. An experienced mortgage advisor knows how to build a smart mix, find creative solutions for equity completion (such as bridge loans or mortgaging parents' existing property with due caution), and negotiate with banks to maximize your financing terms.
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