Apartment interior (file)
Apartment interior (file) Flash 90

The government discussed on Sunday a proposal that would lower the amount of money homebuyers will have to put down on home purchases. Currently, Israeli banks cannot issue mortgages greater than 70% of the value of a property. Under the new law, mortgages will be available for up to 90% of the cost of home purchases.

The law was proposed by MKs Orli Levi-Abekasis, Shimon Ohayon, Robert Ilatov, and Hamad Amar, all from Yisrael Beytenu. The bill is also strongly supported by party chairman Avidgor Liberman.

The purpose of the law, say its backers, is to make it easier for young couples to buy homes. For many Israelis, the MKs say, raising the 30% to 40% down payment that banks demand for a mortgage is next to impossible. By lowering the down payment requirement, a greater portion of the burden of purchase is deferred to later in life, when it is assumed that the couple will be more prosperous, earning more and capable of paying the higher monthly payment.

However, if interest rates remain low, as expected, the MKs believe that the future monthly payments of the money on a 10% down payment – meaning a substantially bigger mortgage – spread out over the 20-30 years of the life of a mortgage and with low interest costs, will not be that much higher than monthly mortgage payments on a 30% down payment.

The law would apply to first-time homebuyers only, and will require an income test to ensure that the buyer can pay the higher mortgage amount a 90% mortgage might require.

According to Levi-Abekasis, “this is an important law for the Israeli middle class, and for anyone who dreams of buying a home. Most of those seeking to buy a first home are unable to put down a third of the cost of that home. Each year, many couples who apply for a mortgage and are found eligible are forced to give up the idea of buying a home because of this issue.” Changing the law, she said, would help many Israelis to achieve that.

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