How is it right to take out a mortgage in times of rising interest rates? - Walla! Sentence

"Many who chose to wait for prices to drop were hurt by the wait when prices soared" (Photo: ShutterStock, Elle Aon)

Wissam Arshid, CPA and certified mortgage consultant, explains in the following article how to proceed when interest rates rise in the economy in regards to taking out a mortgage, how the real estate market is expected to behave following the interest rate increases and who, if at all, should wait with the loan application.

? 2023 precisely because of the Bank of Israel's interest rate increase, whose initial goal is to curb the increase in real estate prices in Israel.

I predict that at the end of the process at the beginning of 2024 the prices will start to decrease."

"Even if there is a drop in prices, which is not guaranteed and you don't know when it will happen, if we look at apartment prices in the last decade, prices have always been on the rise. Many people who chose to wait for a drop in prices were hurt by the wait when prices soared. In addition, more interest rate increases are expected, so as Let's wait to take out a mortgage, it will be more expensive."

According to CPA Arshid, "those who must buy an apartment for various reasons, people who won a price for a tenant or a plot of land of the Israel Land Administration during the year 2023 - it is better not to wait.

Those who are not urgent to buy an apartment can wait until the beginning of 2024 and then decide whether to buy an apartment or not.

Until then, economic actions can be taken that will improve the terms of the future mortgage, such as increasing equity, increasing income and closing loans."

What are the most correct mortgage routes to take in times of rising interest rates?

"The common mortgage routes are prime, fixed interest and variable interest, and there is never one mix for everyone. As a mortgage consultant, I match the right routes to each client according to his short-term and long-term needs, with the rule of thumb being a combination of index-linked and non-index-linked routes, but As mentioned individually. When choosing routes, several factors must be taken into account, chief among them the expected increase in the Bank of Israel's interest rate."

"It is always possible to negotiate the routes and the conditions, but you must arrive well prepared, preferably with a plan that includes a desirable mix prepared in advance by the mortgage advisor. It is important to remember that the major power still rests with the banks and that the interest rates offered by the banks change from day to day, and to inform the advisor at any time in order to close the best deal as soon as it is offered by the bank."

"When planning a mortgage, we take into account the possibility that there will be an interest rate increase, and check in advance the client's ability to repay in different interest rate increase situations. With some clients, we find that it is possible and with others it will be impossible, since they are right on the border in terms of the repayment ratio."

According to CPA Arshid, one should remember the fact that it is impossible to know in advance how much the interest rates will jump, and the year 2022 is an example of this: "The interest rate increased during the year six times.

Therefore, we will not always be able to know with certainty that we will meet the mortgage repayments, but there is a solution for this as well, and that is the possibility of refinancing a mortgage when necessary."

"Following the increase in interest rates, the routes did become more expensive, the monthly repayment for each route increased, and thus the entire monthly repayment also increased, and people who before the interest rate increase were 'on the edge' in terms of a repayment ratio of 40% of the disposable income, after the increase will not meet this condition, and therefore there may be more Refusals to receive a mortgage. There are different types of solutions for this, which a mortgage consultant will know how to help with recommendations, such as adding a partial borrower from the first relative, increasing the couple's salaries, and more."

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