Choosing a mortgage broker - real-estate lawyer in Jerusalem and Tel Aviv

Yoav was excited—he recently received the answer that he was waiting for from the Israeli Ministry of Housing, informing him that an apartment had been approved for him in the Central District of Israel, as part of the “Apartment at a Discount” project. He was out of his mind with joy. The apartment’s worth in the free market was close to three million ILS, while its price in the project was only two million. He felt so lucky for being offered this deal of a lifetime. However, after a few days he came back to his senses and realized that he had a problem. This was undoubtedly a good deal, with no need for approval from a lawyer or real estate appraiser. The problem was that he did not have the required amount to purchase the apartment. Yoav had saved up penny to penny, over the years, and had reached an equity of 500,000 ILS; but that might not be enough for buying the apartment — his income allowed him to pay only up to 70% of the price, leaving him with a missing amount of 100,000 ILS that needed to be added to the equity.

He turned to an expert mortgage broker whom a good friend had recommended, and the broker quickly found him a creative solution. A mortgage of 70%, together with an all-purpose loan of 5% of the apartment’s worth, allowed him to pay the equity required for approval of the mortgage. This story illustrates the importance of having an expert mortgage broker, who may not only decrease the costs but also enable the transaction to take place in the first place.

If you have reached the stage of choosing a mortgage broker, you probably already understand that, in real-estate transactions, any professional service-provider that you choose may decrease your costs, which may initially reach tens of thousands of shekels.

The mortgage is indeed an important step that requires hiring a professional and experienced broker who will provide you with the cheapest mortgage option with the most lucrative interest rates.

WHAT IS A MORTGAGE BROKER?

As opposed to lawyers and appraisers, mortgage brokers are not subjected to regulations and are not required to complete long laborious studies and examinations to receive certification. A mortgage broker is usually a self-educated person who advises clients which bank will provide them with the best mortgage at the lowest interest rates. An interest rate of 0.1% leads to an increase of tens of thousands of shekels in the final price of the mortgage over the years. It is the broker’s job to understand what your income is and what is included in the property under question, and to get your mortgage approved by the bank under the best possible conditions.

That’s why, when choosing a broker—usually in the last stage of purchasing an apartment—it is important to confirm that they are experienced and efficient and have a broad understanding of the finance field so that they can offer you the most attractive deal. A good broker will be assertive with the bank when bargaining the interest rate, the return payments, and even an additional loan to allow you to reach the equity required for approval of the mortgage so that you can buy the apartment.

HOW TO CHOOSE A MORTGAGE BROKER

Precisely because there are no regulations in the field, anyone can declare themselves a broker, even with no minimal knowledge. Since you probably do not have much knowledge in the field yourselves and may not be able to judge the advice you receive from a potential broker, choosing the wrong broker may be a critical mistake that will cost you lots of money.

Your first consideration in choosing a broker should be their level of experience. An experienced broker is familiar with the various banks and knows how to find solutions to problems that come up, sometimes even when failing to get an approval due to their bank rating and low income, a situation which they may help reverse thanks to their accumulated experience.

An equally important consideration is recommendations from previous clients. A mortgage broker may sometimes also be an advisor for the bank. This creates a conflict of interest, since the bank wishes to minimize the risk and the loan, while the buyer wishes to maximize them due to limited equity. Recommendations from friends and family will allow you to find out whether the broker supports the client’s goals or the bank’s goals.

Nonetheless, be aware that a broker who was previously a bank worker will probably be more professional than other brokers. He knows the bank’s weaknesses and how to use these for the benefit of the client, just like a lawyer who was previously a State Attorney worker knows how to get their clients out of various legal situations.

In summary, a mortgage broker is needed and should be hired in all types of transactions. While purchasing from a contractor does not necessarily require having a real-estate appraiser, purchasing a flat always requires having a mortgage broker. The cost of the broker, which only amounts to several thousand shekels, may save you tens of thousands of shekels and even make the deal attainable.

If you are about to purchase an apartment, contact our offices in Tel Aviv and Jerusalem today to get legal advice at no cost.