According to a survey by "Financial Yields", the most common reason for refusal is insufficient income • The second most common reason: a negative credit history • Banks are strict - require a disposable income of at least 35%
The main reason for deferring a mortgage: Insufficient income.
This is according to data published here for the first time.
The second most common reason is a negative credit history, and the rarest reason for deferring a mortgage is "problems with the property purchased".
This emerges from a survey conducted by the company "Yields Finance" for mortgage advice.
The survey was conducted among 630 borrowers whose application was denied over the past three years.
The working assumption underlying the examination is that the banking system does not provide data regarding the rate of rejections of mortgage applications, nor does the Supervisor of Banks address the issue or examine the reasons for their rejection.
Industry sources estimate that hundreds of mortgage applications are rejected each year.
The survey shows that there are four reasons for postponement: The first and most common of them is insufficient income: according to the Bank of Israel's guidelines, the bank can provide a mortgage to borrowers, with a monthly repayment of up to 50% of their disposable income - after deducting fixed liabilities such as loans.
However, in practice, banks tend not to approve a mortgage for which the monthly repayment exceeds 40%, while for banks the preference is for an even lower repayment ratio ranging in the range of 30% -35%.
According to the survey data, the rejection rate for this cause is 31%.
A negative credit history is the second most common reason for rejection: the Credit Data Act, enacted in 2016 and entered into force in April 2019, weights data coming from all banks and financial entities, to rate customers' level of risk.
According to the authors of the survey, since the law came into force, the number of rejections for this reason has increased significantly.
A decade has passed
In the case of those who refused, even those against whom a bankruptcy case was opened more than a decade ago, says attorney Lirom Sanda, owner of a firm that specializes in enforcement and insolvency. He said, " It is worth mentioning that in accordance with the provisions of the Banking Law, a bank is not obligated to provide credit to the customer. "According to the survey data, the rejection rate for this reason is 28%. Other reasons for rejection are problems with the property purchased, or registration of the condominium. Defective in the taboo; age or low seniority at work.
According to Advocate Senda, sometimes one word can significantly reduce the possibility that the bank will refuse the application: "When it comes to a situation where a settlement agreement has been signed or a debt write-off, it is crucial to draft the agreement in a way that does not harm the credit rating," he explains. "Formulate the agreement so that it does not include words such as 'deletion' or 'haircut', but words such as 'compromise' or 'consent before the rule of law'".