Following are the most common questions we receive from our clients. Some relate to mortgages, while others request clarification as to the services we provide. In addition to the responses below, you can find important information in the “Articles” page, as well as throughout the site. Potential clients or people interested in our services are welcome to send in additional questions through the contact form , and we will respond and perhaps publish them for the benefit of our other viewers.
Why should I take a mortgage through the group if I can take one independently through the bank, with terms and interest rates that are better for me?
In order to ensure that every member of the group will succeed in meeting the financial undertaking of his relative part in the project, the group needs the bank’s financing. This financing will be provided by one bank alone, and cannot be divided among different banks. This is because the financing bank records a full mortgage on the entire plot of land, to ensure that all members meet their liabilities.
How is the bank selected?
Determining which bank will finance the project is a choice made by the acquisition group, taking into consideration a variety of parameters. Of course, the bank’s agreement to finance the group must be obtained as well.
What advantage does a counseling agency have with regard to acquisition groups? Why shouldn’t the group manager approach the bank directly to arrange the mortgage for all group members?
An experienced counseling agency has extensive knowledge and is familiar with the many procedures that the acquisition groups must undergo. In addition, a counseling agency will have many connections with various banks, and in many instances this can save tremendous headache and unnecessary aggravation. The acquisition group handles the construction, the plots, the apartment numbers, and more. In order to ensure that the mortgage aspect does not get lost among the myriad other responsibilities of the group managers, it is highly recommended to hand over the handling of the mortgages to the experts who have extensive experience in the field.
What payment options do I have when purchasing an apartment that is part of a group project?
Due to the characteristics of an acquisition group agreement and the mutual dependence among the group members, it is important to make sure that each member of the group has adequate financial resources for the completion of the construction. Therefore, every member is obligated to open a mortgage loan file, or alternatively, make an advance deposit of the full amount of all future costs into the project’s account – to ensure his payment of his part of the project costs.
I currently have the full necessary amount for the construction of the apartment, but as long as the construction had not been completed, I prefer not to risk all the money. Can’t I pay in installments according to the pace of construction?
As previously explained, one option is to pay the full amount to the group in advance, while the other option is to take out a mortgage. However, a buyer can sign a mortgage plan even if he will not actually effectuate the mortgage transaction, but instead pay the necessary amounts along with the rate of construction. This is performed in the following manner:
You approach the bank to sign on a mortgage plan, and the mortgage is approved. In reality, however, you do not actually pay back the mortgage itself – only the interest – until the completion of the construction. Only once the construction has been concluded can you actually effectuate your mortgage. As the construction progresses, you will gradually be charged varying sums for the construction. However, all buyers will receive a quarterly message, with a two weeks’ notice, offering two options: a) to pay the sum currently necessary for the construction immediately and in cash, or b) to effectuate the mortgage. If you choose to pay the required sum for this quarter in advance, the effectuation of the mortgage will be pushed off for the next quarter, at which point you will once again be asked for an additional sum and given both options, and so on.
How does the actual mortgage payment take place? When does it begin?
During the construction period, the mortgage is not yet effectuated. First, only the mortgage’s interest rates – approximately 4.5% – are charged, while the actual mortgage is implemented only upon completion of the construction. This is performed in the following manner:
At the beginning of the construction process, a low interest rate is charged, in accordance with the amount of money that the group then demands to cover the costs of beginning the construction (building materials, workers’ wages, etc.). For every 100,000 ILS demanded for construction purposes, members will be charged 450 ILS each. However, as the construction progresses, the amount of money necessary for the construction costs increases, and with it – the interest rate charged. Only once the construction has concluded, the entire interest will have been repaid. Thus, a mortgage costing approximately 1,000,000 ILS will, during the initial phases of construction, involve a low charge of 400 ILS, for example, while in the last stages of construction the charge will be 4,500 ILS. Of course, these numbers are not accurate; they may be far lower, and change based on the rate of construction as well as other parameters.
If a group member was not approved for a mortgage due to his low income, can he add a guarantor to his mortgage application?
In acquisition groups, only an “arev tomech” (a co-signer who also pays a percentage of the mortgage himself) may be added. An arev tomech is a close relative (parent, sibling, child) who has sufficient income according to the bank’s stipulations. The arev tomech co-signs the loan and pays a certain percentage of it, as determined by the bank, every month via a standing order. For example, a client may ask for a mortgage plan with a monthly repayment of 3,500 ILS. If the client does not have sufficient income for this plan, the bank may decide that he must add an arev tomech, who will then pay approximately 25% – i.e. 875 ILS – via a monthly standing order.
Can any close relative serve as an arev tomech? And if the borrower’s income increases over time, is the arev tomech obliged to continue paying his percentage of the mortgage loan until its conclusion?
When approving an arev tomech for mortgage purposes, several factors are taken into consideration, including the income of both the borrower and the guarantor, the mortgage amount, and more. The bank’s terms of approving an arev tomech are very clear, but at the same time, there is no obligation for the bank to approve an arev tomech, since this is an exceedingly sensitive and delicate issue, in which many parameters are taken into account.
Since the mortgage is effectuated only upon conclusion of the construction, in a case in which the borrower’s income had significantly increased during this period of time, it is possible to refinance the mortgage previously approved by the bank, this time attempting to get it approved without the arev tomech. However, this cannot be done during the construction period; only upon its completion, and only in accordance with and in consideration of the borrower’s current financial and personal status.
Releasing the mortgage loan funds must be done concurrently with all members of the acquisition group.
Why is the price lower for an acquisition group?
The financing rate is determined based on the cost of the property for construction, not its value as a completed apartment.
Why must I pay handling fees on the mortgage if the interest rates are uniform for everyone and the terms arbitrarily set by the bank?
With regard to the fees paid to the bank providing the credit to the acquisition group, group members are charged handling fees for the bank’s approving and extending the credit, opening the loan files, preparing the legal documents (these documents are different and far more complex in comparison to a standard mortgage plan) and regular handling of the group.
Why is the interest rate in an acquisition group higher than the interest rate in a standard housing loan?
The difference is due both to a consideration of the bank’s risks as well as to guidelines set by the Bank of Israel. Let us not forget that the bank has profitability goals, and an acquisition group is certainly a reason to profit.
Who is responsible for the money in an acquisition group – the group, or the lending bank?
The group is responsible for managing the funds, opening a trust account into which all funds are deposited and then transferred to the relevant parties as necessary.