More often than not, “simple” choices aren’t as simple as they seem. Having opened up our second location on King George St., one of the busiest streets in Jerusalem, we felt it would be a good idea to install flat screen monitors in our window displaying current mortgage rates and terms. We assumed that the purchase and installation of the screens would not be overly complicated, however, our assumptions were far from correct. There are literally hundreds of options to consider ranging from screen size, flat screen technology, resolution, mounting solutions etc. It turns out that the purchase of a flat screen is a lot like taking out a mortgage in Israel.
There are numerous types of flat screen technologies, each of them with their own advantages and disadvantages. What looks good in the store may not look the same way in your home or office. Similarly, with regards to mortgages, what may be appropriate for one borrower may be completely inappropriate for another. For example, a foreign currency denominated mortgage may work well for a borrower earning his or her wages in that currency, but will present a financial risk to someone who is not. Some flat screens are better suited for outdoor use while others are more appropriate in the domain of ones living room. With mortgages, some scenarios call for securing a fixed rate, will other scenarios are best served with a variable rate. Pinpointing the exact needs of the borrower, and pairing those needs with the appropriate loan product is critical.
While we were eager to finish with our flat screen project, we knew that picking hastily and “just getting it done” could end up in our making the wrong decision, the result being poor visibility through our tinted windows, not being able to make out the information if one is either too close or too far from the screen, or even worse, that the screens would be used incorrectly and burn out, voiding the warranty.
When considering which mortgage product to take in Israel, one similarly has dozens of variables to consider and each situation calls for a different solution: fixed or variable rate, foreign currency or shekel, linked to CPI or unlinked etc. Interest rates on these choices are fluctuating constantly and all may have massive discrepancies on rates between each bank. To further complicate matters, some banks provide 30-year loans while others only go up to 20 year. Some banks allow for a waiver on life insurance while others don’t. Some banks have excellent rates on purchases but high rates on “cash-out”. Some banks require full documentation while others are less critical. Some banks “lock” the rate spread after the first installment, while other do not. The list goes on and on.
With all of these variables to consider, one may be tempted to turn to a bank’s mortgage adviser or manager for guidance since they are likely highly qualified individuals who offer their advice as a free service. However, just as I found in searching for guidance from the numerous flat screen salesmen I turned to, even the most well intentioned bank manager can only offer the mortgage products that his bank offers. As there are nearly a dozen lenders and close to 40 different mortgage products available, the advice offered from bank employees cannot cover the full gamut of options available.
Securing the right financing options can save hundreds of thousands of shekels over the life of the loan. Therefore, it is always advisable to seek professional guidance from an independent mortgage consultant who has only the client’s interests at heart and who is equipped with all of the financing options the market has to offer – especially, since with regard to mortgages, if you “burn out” there is no warranty.