How Much Mortgage Can You Get? Here's How the Bank Calculates It
Before you fall in love with an apartment, it's worth knowing how much mortgage you can really get. Two limits determine the amount: the repayment-to-income ratio, and the financing percentage of the property's value. The amount you'll get is the lower of the two.
The first limit: the repayment-to-income ratio
Under Bank of Israel directives, the monthly payment can't exceed 50% of your disposable income. In practice, a payment above 40% is considered risky, and most banks prefer a lower ratio. Disposable income is your net income minus fixed obligations such as loans.
Example: A couple with a net income of ₪20,000 a month and a car loan of ₪2,000 a month. Their disposable income is ₪18,000. At a repayment ratio of 35%, the monthly payment can reach about ₪6,300. At an average interest rate of 4% over 30 years, that's a mortgage of about ₪1.3 million.
The second limit: the financing percentage
The bank doesn't finance the full value of the apartment: up to 75% for a single apartment, up to 70% for home upgraders and up to 50% for investors. If the couple in the example buys a single apartment for ₪2 million, the financing percentage allows up to 1.5 million, but their income allows only about 1.3 million. So they'll need a down payment of about ₪700,000, not 500,000. The full explanation is in the article Mortgage Financing Percentages.
What else affects it
Job stability and seniority at work.
Your credit history.
The loan term: a longer term allows a higher amount, but costs more interest.
The mortgage mix you choose, which affects the size of the monthly payment.
Before you start searching
The best way to know the real amount is a mortgage approval in principle. Want to work out your numbers together with me? Book an introductory call.
This article is for general information only and does not constitute personal advice. Calculations are based on a Spitzer schedule (equal monthly payments), without CPI linkage.
