5 Common Mistakes First-Time Buyers Make With Their Mortgage

1. Choosing an apartment before checking repayment capacity

Most first-time buyers go through the process in the wrong order: they find an apartment they like, and only then approach a bank to check how large a mortgage will be approved. The common result is time pressure, compromises on the mortgage terms because "there is no time to compare", and sometimes disappointment when it turns out that the budget does not match expectations.

The right order is the opposite: first check your capacity and a realistic monthly payment with several banks, and only then go out to search - so that every apartment you look at is already in the right price range.

2. Choosing a mortgage track by the lowest payment today

The mortgage track with the lowest monthly payment in the first year is almost always a CPI-linked track or a prime track, and not necessarily the cheapest over time. Many buyers choose by the number in the first offer, and discover a few years later that the payment has risen significantly.

The right question is not "what is the monthly payment today", but "what happens to this payment if the Bank of Israel rate rises, and what is the total payment over the term".

3. Applying to only one bank

Each bank prices risk and interest slightly differently, and sometimes the gaps between offers from different banks for the same file reach tens of thousands of shekels over the life of the mortgage. Without a parallel comparison you cannot know whether the offer you received is the best you could have received.

4. Opening new loans close to the mortgage application

Any new financial commitment - including a high credit limit on a new card, or a small car loan - can affect the payment-to-income ratio the bank calculates, and sometimes even reduce the approved mortgage amount. It is better to avoid major financial changes in the months before submitting the application.

5. Ignoring the related costs

Purchase tax, attorney fees, brokerage fees and appraiser fees are added to the price of the apartment, and sometimes reach tens of thousands of shekels more. Buyers who plan a budget by the price of the apartment alone discover at the signing stage that they lack the equity to complete the deal.

To plan an accurate budget in advance, it is worth running an estimate in the home purchase costs calculator before you go out looking for a property.