The real estate market (photo vecteezy)
The election results for the 25th Knesset already predict what the new government will look like. Opinions are divided and divided, but we can agree that after more than 3 years of transitional governments, the time has come for a stable government that can produce change in the short and long term and solve the growing problems in the country, the most prominent of which is the housing crisis.
The new government can and should take significant steps and benefit the mortgage holders especially in view of the increase in the Bank of Israel interest rate and alongside the burning real estate prices.
Here are some changes that the next government has the power to make and thus make it easier for the general public:
1. Streamlining the eligibility loan of the Ministry of Housing – The points in this benefit are accumulated according to various parameters including years of marriage and number of children. Couples who have not yet married or are defined as ‘publicly known’ and do not have children or did not come from families blessed with children, will probably receive a minimal number of points. In addition, if one of the spouses owned an apartment or a part of it that was inherited, then the eligibility is completely deleted. If the Ministry of Housing is interested in helping young couples when purchasing their first apartment, it is time to perfect the scoring system. Also, it is more correct and proper that within the framework of the eligibility loan, the Ministry of Housing will give permission and an additional percentage of financing through the bank to the homeless who meet the parameters, thus making it easier for them to take out a mortgage with only 10-15% equity.
2. Updating the value of the assets – Families who took out a mortgage several years ago should be allowed to update the interest rates to lower ones automatically (!) and without requiring a full mortgage cycle process. Interest rates are determined according to the level of risk that the bank takes in providing the loan and the higher the percentage of financing, the higher the level of risk. After several years of taking out the mortgage, the loan debt decreases and the price of the apartment increases, which means that the bank that gave the loan is definitely at a lower financing percentage and a lower level of risk.
3. Recognition of additional income – Today, with the Bank of Israel’s interest rate rising, which is expected to continue, the amount of the monthly repayment not only burdens many families, sometimes it even constitutes a barrier and the bank does not allow them to take out the required loan at all. The bank’s income test is calculated based on a family’s net income after deducting liabilities. But the net income is strictly calculated and only at the current time for the loan request, even though mortgages are taken for a period of 20-30 years. The banks do not consider rental income, do not consider expected income for people who are completing a degree or are in an internship, and do not consider a gift or regular monthly support.
Even if a guarantor is included in the transaction, the calculation of the net disposable income of the guarantor is done in an extremely strict and not necessarily logical manner and the demands from him are excessive (payment of a certain part of the loan). Recognition of other income that does not come from a paycheck, which banks currently do not recognize, should be allowed and the strict threshold requirements applied to the guarantor should be eased.
4. Enough with the mortgage penalty! – The profitability of the banks in Israel from granting mortgages is one of the highest in the world even compared to the markets in Europe and the USA. Families who sold the property and wish to pay off the funds and refinance the mortgage – will be charged a mortgage fine. Families who wish to refinance a mortgage to get better terms from the bank – will also be charged a fine! It is worth knowing that the bank was not harmed and suffered no financial damage from the mortgage disruption. The income data of the banks in Israel from mortgage recycling fees and fines reach billions of shekels every year.
The bank actually “locks” the borrowers and does not allow them to improve their financial situation and even influences the decisions they make going forward.
All of these issues require a stable and courageous government that is ready to take steps and provide regulations, thereby benefiting mortgage holders and alleviating the housing crisis.
The author: Raphael Shavor, CEO of ‘Harel Prime’ and an expert in accompanying mortgage and financing transactions.
Raphael is black. Photography: Chess Photography
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