💰 עסק או ביש - פרק 15: משכנתא בגובה העיניים: המדריך למתחילים

The business world is one big jungle. There are two possibilities in it. Either you are sitting at the table, or you are part of the menu. "Esek Ovish," between promises and reality behind the scenes of the real estate world. Host: Yossi Palai. , where did you disappear to? Yosaleh, Shuleh, blessed be the years. >> Welcome. >> Today we will talk about the episode of mortgages; now, mortgages, I tell you, it's like a vaccine, you know, nobody wants it, but there's no choice, you have to. >> You have to; we all encounter it, whether it's a mortgage, or some loan, or a loan for any purpose, we always encounter this event. And therefore it is highly recommended: this episode is a very, very important episode, one of the most important I can say among the episodes we have aired and will record here. Apropos the election atmosphere, it is always the most important election , right? We always say, now these are the fateful, fateful elections. So, I say: this is a very, very important episode. >> So really, whoever can, sit with a cup of coffee or a fruit smoothie, cold water, whatever everyone can, at ease. >> And a pen and paper, it is really worth listening; there will be concepts here, we will try to make it as simple as possible, but there will be professional terms, but we will really make it as easy and simple as possible, and it is important because when you actually get to take a loan or [see] a consultant who will offer you a mortgage, you will know what he is talking about. Again, whoever wants to delve deeper into it later and get into the specifics, exactly. >> It is clear that we will understand that it is not Chinese, and it is also not that complicated, and it is not rocket science. Therefore, this is a very important episode. This is the first introduction. Let's begin. >> Wait. This is the first introduction. A few introductions, if you'll allow me. A second thing, another tip, let's call it . Before you take a mortgage, or in general before you make a deal. Very, very, very important is early planning. Meaning, ah, banks, you need to understand, they are like any horse traders or like any traders for all intents and purposes; they sell you money, and when you come to the bank under pressure or under time pressure, the bank knows how to exploit it, and the interest rates will be accordingly; meaning, the bank is not some sterile place and everything works according to rules, or not. >> The most opposite there is. >> Beautiful, treat the bank exactly as you would when you enter a supermarket or the market and you are currently doing a tender on money, and therefore when the bank identifies pressure. >> More like a market, yes, so it says, wait, he doesn't have much time or options now to do a survey and a tender between several banks, and therefore I ... >> The price goes up immediately. >> Certainly, the price goes up immediately , and I tell you this from knowledge of banks; this is how it works, so. So this is a very important thing: to come organized on time. A second thing, it is also very important, when we enter into agreements, to always know how to take the time, [knowing] that there are glitches and things drag on and documents are missing. Always, always leave at least—since the consultant (if you are working through a consultant)— if the consultant tells you, for example , it takes three months, always add at least another month for all sorts of bugs, holidays, if they didn't show up for work, or the clerk is on maternity leave—everyone has their own stories—so you don't end up in breach of contract or other problems. So that is the second thing. Another thing I want to say is a type of disclosure, as someone who deals with mortgages: we are currently at our company in the final stages of developing an algorithm, a very, very special software for mortgages. We are currently directing it mainly toward consultants. The one developing this for us at the company is my partner, who I don’t know if he wants us to say his name, but he comes from the worlds of cyber, from the worlds of...what this machine actually does. >> In theory, what it does—we initially thought of it for the general public, but at this stage, it's for consultants . What it does, simply put, in one sentence: it reduces nearly 70%of the consultant's work, it's accurate, and it performs almost full automation from the initial stage to nearly the final signing stage. The systems actually know how to read, analyze documents, and write emails to each other. The consultant just sits as a kind of commander, checking things, and where there are glitches, the system alerts them, and that is actually where they get involved. They can call the client, but by and large, it frees up a lot, a lot of time for them to acquire clients . >> Okay, because today consultants tell me : "Listen, I have no time, I'm so busy for hours with technical stuff, reading documents, and understanding, and calling, and the client—yeah, you know, the grunt work." >> Exactly, and then they say: "I have—I have a lot of clients that I can't take on, and that is a lot of money for the business." So it gives them a lot, a lot of time to deal with marketing and let the system work, instead of sitting for hours dealing with boring and very technical things: "Did they answer me or didn't they answer me?" On the client's side, often the client says: "The consultant doesn't answer me, is available, isn't available," because again—they are busy. So these systems, in fact, what it is doing right now is running in a very successful pilot. So by the way, any mortgage consultant interested in trying out this pilot can send a message to 055-7128728, can activate some kind of pilot and move forward from there. So that’s it, we finished that topic. And a thing, the last thing I want—opening a small parenthesis, this is something last before we start, which concerns both consultants and clients—that you really need to be fair to both. There is—when making the engagement agreement between the consultant and the client, you need to pay attention. Many times, in many agreements I have seen and encountered with folks who also brought them to us for advice, we saw that what—the stage where you are committed is the principle approval, so you are obligated to pay the money. Now, that's problematic, because a principled approval is usually a very, very initial stage, and it doesn't guarantee you'll get the money, nor does it guarantee the terms under which you'll get it, if at all. On the other hand, you have to be fair to the consultant; they worked, they put in a lot of effort. Sometimes the client, for one reason or another—I don't know, maybe they won the lottery—the consultant did the work, brought what they promised to bring, and then the client says "I don't need it," so... well, you have to be fair to them as well. So you just need to agree that, in fact, the payment should ideally be— again, I’m just giving advice, everyone can do as they see fit—but effectively when the process is finished and you have received the money. Unless you, as the client, suddenly change your mind, then pay the consultant, they deserve it , they don't work for free. Just make some...there have been cases where people, the consultant I don't know, promised 4%interest and brought 6%, it doesn't matter for one reason or another , and the client didn't want to take the mortgage, but they were obligated to pay because...so that's, again, just advice , I'm not...everyone should do as they see fit. Okay, so let's, let's start for a second with the first stage, let's create a flowchart of how the process works. Before we dive into the details, what is the process—what are the stages until receiving the mortgage? So, actually, the first stage is the principled approval. All right? The client approaches the bank, or of course through a consultant, and receives a principled approval based on the data they provide, usually verbally; they state the type of transaction, their income, etc., and then what their repayment capacity is, and effectively they get a principled approval. So as we said, it's a principled approval, it's a very, very preliminary approval. In the next stage, they are effectively required to bring documents to verify the same data they provided, based on which they received the approval. If all documents are in order, the bank, the local branch for that matter, confirms everything is fine, and we move in this stage to what is called the collateral stage. Okay? The bank now wants, okay, it approves the mortgage, you need confirmation of cautionary notes, whether it's the Land Registry, a housing company, the Israel Land Authority, etc. It's another game of ping-pong; I'm doing this quickly, but these are processes that in banks, as you say, oh boy. >> And speaking of what we returned to regarding the idea that there are many solutions for these things today, but how it works currently is a lot of ping-pong and back-and-forth, and is this a good document or a bad document, you know. >> Exactly, anyone who has been through it , anyone about to go through it, should prepare for the fact that it's a kind of "virosa"(hassle). Yes, for the sake of the argument, everything is fine, everything is in order. The file goes up for underwriting, for what's called " hatum," all right? Each bank has its own center, Mizrahi, I know, sits in Lod, Leumi...each one has its own thing. It moves to underwriting, which is effectively the final approval and execution. The esteemed clients, the couple, are invited to come and sign and receive the money. That is effectively the process, the flowchart—call it what you will, from step A to step B. Are you asking how long such a process takes? So , like you went "oy oy oy," if you are an absolute pro, a solid client and everything runs, and you are also diligent and quick and the advisor works fast. A month—if you managed to get through this process in a month, that's championship level. A month on average. I did a little bit of this. >> Fast is a month. I did a bit of homework , from here it’s two to three months and up. All right? So that’s the event. Now, we have this regulation called the Bank of Israel, which is essentially there, from the opposite perspective, to protect the client. Yes, so that God forbid it doesn't reach a receivership or foreclosure, as they call it, which is what happened, apropos of what we said about the United States. So they limited it. They said for a first apartment up to 75%, for an additional apartment, an investment apartment, 50% . Nice. You should know, however, that similar to what we discussed in the chapters on real estate taxation regarding home upgraders, you come to the bank and say I'm buying a new apartment but I... >> Alternative apartment. >> Exactly, I want to sell the previous apartment. Then no problem, you will receive 75%. You provide an affidavit to the bank that you intend to sell the previous apartment, and that you will indeed remain with one apartment, and you will receive 75%. Okay, so we have 75%, 50%. Great, so that's in terms of Bank of Israel regulation, where the bank has no...has no say here, meaning the Bank of Israel does not permit giving more than that, again to protect the client. How do they check? Apropos, we talked about documents, how does the bank check the client's repayment ability? After all, the client is requesting a mortgage , the bank wants to ensure he can repay the mortgage, how does the bank...it's important. >> Yes, that’s the most important thing, it has no interest in getting the property back. >> It has no interest, exactly, it has no interest in chasing the client or ending up with them in receivership, bankruptcy , or debt collection—the bank. >> By the way, let's just note that really reaching the process of bankruptcy and eviction from an apartment, that is very , very rare. >> Correct. >> Banks don't...really no, they will reach an arrangement with you, maybe not the right thing to say, yes, this is not, it is not a recommendation, but... >> If God forbid a person falls into a situation where they cannot pay, the bank would prefer to reach some arrears arrangement with them rather than reach a situation where it has to sell the apartment to get the money, because that’s not good for the bank, it’s not good for anyone. >> These are very, very extreme situations . >> From the bank's perspective—and again, I’m telling you this after conversations with many high-level bank officials—the bank operates on a "set it and forget it " method. The best customer in the world for a bank is: take the mortgage, and I don't want to hear from you for 25 years . That is the best customer. If you think that coming to the bank a lot, breaking things, depositing and withdrawing all the time is good, the bank doesn't like that. As far as the bank is concerned...I remember once—a personal story of mine—a long time ago, I went to one of the banks in Israel and I had a very, very good, very healthy, very large deal, with a very large sum. I ran a tender, as we discussed, on which bank I preferred, this bank or that bank, and I arrived at one of the banks. It was truly a wonderful deal, and they invited me to the regional management, all of this in the Tel Aviv area, it doesn't matter which bank. I go up the tower, sit across from the person in charge of mortgages at the bank, the VP of Mortgages—every bank has a VP of Mortgages—and I come in all happy, you know, like a trader, ready for tough negotiations. I want a good interest rate, I want good terms. And I sit and present the deal to him, he looks at me , and I will never forget the sentence. He says...he tells me: "No, I like this less." I asked him: "What do you mean?" He tells me: "I’d rather give the mortgage to a couple where the husband works in the fire department with a salary and the wife is a teacher, than give it to you." I said to him: "What does that mean?" I know, you have crazy profits here, just take this, we're talking about millions, it's interest ...leave it...I know, I gave [my info] ...he has a salary, he has income, you are like this, not traders who do this and buy and sell. Now, in this specific case, he is a certain bank that knows less how to deal with more disorganized deals, more complex deals. >> Yes, they really love simplicity. That is why I say banks generally want a business that runs itself. They aren't looking for trouble, as you rightly said , they aren't looking to foreclose, and to their credit, it must be said that they really go to the edge to give another chance and reach payment arrangements; they don't want to reach that point. >> Okay, so how does the bank—anyway, let's get back to our business. >> Just, as an aside, someone who does reach an enforcement office case—I mean , if an enforcement file is opened against you, your situation is very bad . And it's not as bad now as it will be when you try to recover. Meaning, okay, an enforcement file was opened, you reached some kind of arrears arrangement, somehow this bank—not only did this bank divorce you completely, but any other bank you go to that sees in your credit report that you had an enforcement case, it’s a sign, a black flag. Try not to get there. >> Yes, no, it's certainly better not to, but I'm saying, on the other hand, you don't... >> No, it sounds like, it sounds like the banks will do everything so that the customer won't reach some...it’s not, it’s not, it’s not that rosy. Meaning, one must say that if the bank and the customer, again, for objective reasons didn't succeed, everyone has things in life you know, don't get there easily, it’s not, it’s not good for you. Also, you shouldn't despair, I’m telling you honestly. It’s...true, true that, many times you will be what’s called "burned " by a certain bank, but like you talked about the BDI, the credit data report, then it really will show up in practice . But by the way, after two years, I think, I think it’s two or three years, maybe three, you need to check the statute of limitations, like, the expiration. By the way, banks too, it’s just that there were cases where a person eventually recovers and the bank understands, his circumstances are related to him, it’s not something intentional. It’s not the end of the world. Okay, it’s clear that it’s not pleasant and...not to get there, but even if you got there, God forbid, it’s possible to get out of it, it’s perfectly fine. So how does the bank actually check this whole issue of the ratio, of your repayment ability? So the method was, they want 40, 40. >> Of the disposable income, so that was the calculation until today, and recently they changed the calculation, nice, how the calculation worked all along. >> It said like this: let’s take an easy example. For example, you earn—forget about spouses, let’s say, since you always combine spouses if there are two borrowers—let’s say one person earns 10,000 NIS a month, that’s their real net, 10,000, and they have a loan of 2,000 NIS. So the bank says: wait, how much is left available to him? 8,000. Let’s take 40%, which is 3,200, right? 8 times 4 is 3,200. So that’s what you have, that’s your disposable amount, 3,200 NIS. That’s what you can take a mortgage for, with a repayment that won’t exceed 3,200 NIS. That was until today. Now, recently they changed it, they changed it a bit to the customer's disadvantage, meaning it lowers it even more. Why? They changed the calculation method, where the calculation says the same thing: let’s take 10,000 NIS, but now we don’t do like we did before— minus 2,000. >> Instead of... >> Exactly, now they take the 10,000 NIS. Apropos what you said, you should write it down because it will help you calculate how they determine your disposable income. So 10,000 NIS from here; now we take the 40, 40%, which is 4,000, and now we subtract the 2,000, and then how much is left? 2,000 available. So if in the previous calculation he had 3,200 available, in the new calculation only 2,000 available . By the way, and this has created many , many, many problems for people who suddenly find it hard to get a mortgage , because the income is the same income , the calculation method reduced their disposable income and it creates many problems, first of all. >> Yes, a real headache. Mortgages don't exactly work out, and how do you earn the same again due to the calculation method? It created a lot, and you need to find creative solutions, and then you have to bring in or find extra work to increase your income. So that’s how they calculate it so you’ll know your debt-to-repayment ratio and your disposable income: how do you actually pay it back? How is it calculated, for instance? Nice, oh. >> One is...it’s this part, why? Because you take, you take a mortgage for 20 years, 20 years, and after five years, I look. >> And not only did nothing go down, it's a wonder. >> Exactly, and you’re like, I pay 5,000 NIS every month, I check after five, six years, listen, nothing went down. >> Not only did it not go down, exactly, it also goes up sometimes, it even rises, right? Index and stuff. >> Right, right. Why is it like that? Why like that, as they say? Why? Because the repayment method is built on what’s called—actually, there are two, you have to say two methods. What happens is the Spitzer table and the constant principal . These are the two mechanisms the banks work with. The most popular one is that Spitzer table. What does that mean? The repayments consist of principal and interest, and what the bank does in the first few years is first of all quickly take interest, interest, interest, almost earning the money; they hardly touch the principal. That’s the ratio, you have to understand, on average 70, so you understand, 75/25. >> Not that much, 60 is much more. >> 70/30, confirmed. >> I checked yesterday, I actually called the banker yesterday. >> Yes, yes, we are thorough, we are, we come to this, we need to come prepared. >> So I said, tell me, I threw out 70/30, he told me it could sometimes be 75/25, and like you say 70/30, or as you say 60 , but I say 70/30 is the average. >> That's surely most of the money wasn't even cut. >> Exactly, meaning I’m paying back so much , almost nothing came off my principal, and therefore after many years when you look, you see that the business hasn't moved. When does it start moving significantly? Towards the end of the term. That’s where you start to really see the principal starting to be cut faster. And that is why there are those who take what’s called, know this, called constant principal. The advisor will tell you, or the bank if you go alone, they will tell you "constant principal"—don’t be wide-eyed, tell them "we know what that is," don't mess with us, we know exactly what Spitzer is and what constant principal is. So constant principal means that from day one, from the first day, you reduce an equal amount from the principal. >> Except that... >> And you pay the ratio of the interest, from here you pay part of the interest on the remaining amount, but what is the advantage here and what is the disadvantage? So, ostensibly, you’d ask why isn't everyone doing that? >> The interest rates. >> Nice, so what, what is the problem? First of all, your monthly payment is high right from the start, okay, it is relatively significant, two, as you say , ultimately on interest, but where is your advantage? Who is it good for, for instance? >> No, interest rates won't necessarily be clearer upfront. >> It's not guaranteed, it's not guaranteed that the interest rates are clearer; your problem will be over time. >> The fact that payments are actually much higher at the beginning and will be very low at the end. >> True, but now not everyone can handle the high payments. But for whom is it actually good? There are many people who take out a mortgage, knowing in advance that they won't—they took it for 25 years, but they say: "I already have a plan, in seven years I'm paying it back , I mean, I'm settling it." No, it's good, because when they come to settle it, their principal is much smaller than in a Spitzer schedule. When they come to settle, because in eight years they are only starting to slowly eat away at the principal, so for them, it's worth it. That's why there are some who really prefer it. Most of the public actually works according to Spitzer, because they really take it for 25 years, unless they win the lottery or something, then they could pay it off and the interest wouldn't bother them, but because >> We talked—remember in one of the episodes we talked about how much is left really when you take 25 years, you took a million shekels, we saw astronomical sums, how much you end up paying for every shekel you took. >> Exactly, for every single shekel you took. >> What is the average today, by the way? >> So we figured, I think, for a million, we did the math, so a million shekels, it turned out that at the end of the period, you'd pay almost 1.8 million or something—something crazy, if it's for 30 years. >> Yes, yes, for 30 years. >> 30 years is a lot of money, yes. >> Still almost double. >> True. >> Okay, so these are essentially the two mechanisms for how your repayments are calculated. >> By the way, we didn't explain why it's possible that in the first few years we see that the mortgage actually went up, and here it should be said that if you take a CPI-linked path, then that's what will happen. >> Okay, one second, let's not get to the composition just yet, what you're talking about, it's just important—I think for the flow, let's not delay it. >> Everything is fine. We are doing this step by step, which is why it's important you stay until the end, because it's truly structured in a very organized way so you understand every step—how it works. So we went over the flow chart, the process, we explained what it is. That, uh, that available amount, what did we call it? The amount of the debt-to-income ratio, right? How much money is available for the mortgage, those 40%. How, how, how do we calculate it? We explained Spitzer, what it is, and what a constant principal is. Okay. >> Now we will talk about the paths, how the mix is exactly—they tell you there is a mix, how they prepare the coffee for you. >> Again, the mix—also here the Bank of Israel intervened, and they demanded that the mix, a third of it, okay, that it's divided—pay attention, it will always be divided into three for you. We'll say in a moment what those three paths are, but we can say them right now : we have Kalatz—you will hear this term : Fixed Non-Linked, meaning it's a fixed interest rate that is not linked to the CPI. There is a fixed interest rate, but it is index-linked, sorry, to the Consumer Price Index. Alright, again, here you have more risk because you are dependent on the index. And there is the prime interest rate, okay. These are the three popular tracks . There are a few more, but you will always see—these are the three popular tracks. The Bank of Israel requires at least a third to be at a fixed interest rate. >> You must. >> You must have a third. No, you don't have the option to say I want 100%of it . >> At prime interest rate or that's not— >> No, ah, that's prime, not yet, but if you want all the interest to be fixed and linked— >> No, you can ask—no, you can't—you can't do the opposite, meaning you can ask for all of it, but it’s not worth it for you . >> Why? I know someone who did that before the interest rate hike. >> So? >> That interest—you remember that the prime rate was another 1.6%? Anyway, he took a mortgage of about a million something at an interest rate of 3%. Think about it, a fixed 3%interest rate , and today, today he is very rich. >> Okay, by the way, in these cases when you want it, the exits are very expensive, meaning— >> Ah, in the fixed one? >> In the fixed one, yes. That's why many people want it less, and honestly, you don't know if there are fluctuations—if the market goes down, you'll never benefit from it. >> So, but the Bank of Israel did want and order that there be at least a third at a fixed interest rate. >> Wow. >> And then they divide it up. We have interest, fixed interest. We have that same fixed non-linked or fixed linked, prime, and interest that changes every two years. Okay? This sounds like Chinese right now. Let's take a second, let's break it down, let's, let's think . So we said fixed interest, fixed interest as you said, you close with the bank on a fixed interest of a third. Let's take an easy number, 900,000 NIS so it will be easy for us, 300. 300,000 NIS at a fixed interest rate, 300,000 NIS more at the prime interest rate. What is the prime interest rate? So prime rate, they tell you prime, prime, again it's the Bank of Israel interest rate. >> Plus, plus one and a half, 1%. That means today we are at, I think, 4.75 the prime. Why 4.75? Because the Bank of Israel rate is 3.25 plus 1.5, so we are at 4.75. Who determines that Bank of Israel interest rate? It's always the Governor, there is the Governor, it's called the committee— >> The Monetary Committee, the Monetary Committee sits with six members headed by the Governor of the Bank of Israel, and that's what you hear every time in the news, the Governor decided to raise , the Governor decided to lower the interest rate. I think it's eight times a year, roughly once every month and a half there is an update. >> By the way, just curious, how do they ensure there is no conflict of interest for the guys, the board members? >> I don't know, you said, we said everyone has mortgages, right? Yes, it can, this can influence the whole country. What, he'll start lowering, how much will he lower the interest rate? He has a mortgage, so he will now know the interest will...look, what about you? >> Come on, these are heavy guys, mortgages , six members. Listen, you need everyone , all six, by the way, it's a majority decision, that's correct, a majority determines, what is called. >> Ah, yes, and they decide. >> They can decide against the Governor, I think. >> Absolutely, he has two votes, the Governor, yes, he is worth two votes. >> But if, let's say, he now goes on some adventure and says, "Listen, I want to defend the exchange rate," and he starts , there is always someone who will say, "This is unacceptable to us," and they stop it. >> Very interesting. >> True, so it's roughly once every month and a half there is an update, so for a month and a half, 45 days. >> Correct, so when they tell you the prime interest rate, you should know they take the Bank of Israel rate plus one and a half percent. >> Wait, actually, yesterday—apropos, we are recording this the day after— yesterday the interest rate really stayed the same, which is, by the way, a very interesting indicator both regarding the elections and an attack on Iran. >> So we have it like this: when they mention prime, you hear them say: prime minus a half, prime plus...always take 4.75, subtract a half, add a half—that is what the prime interest rate tells you. So we have, we talked about the fixed interest rate, okay? What we said : fixed linked or fixed unlinked. We have the prime interest rate and we have a variable interest rate. What is a variable interest rate? Every two years , there is every two, every five, every seven—that already depends on the banks too. One bank, for example Bank Leumi, I understood that it—it also has a variable interest rate every year. It has some kind of thing, a trick, it's like they have something for the short term, there's some...who mainly does that? I don't know, good, not good, let everyone decide. But the idea of a variable interest rate is an interest rate that is subject to the yields of the bonds, the State of Israel bonds. What does that mean? People invest money , lend money to the state, and receive yields from the bonds, and then they take that same bond yield—for example, it's 3%—the bank adds its margin of one percent, and then you get 4%, and then you see that your variable interest rate is 4%. Okay? Once there is a change in those bond yields. >> So every five years they check what the bond yield is. And then, there are two, five, many do a station every two years . So, every two years they check, there is also every five, it is popular, right ? And then you look at what is happening here. Hop, the rates change, if the interest went down, you profited. That is the track, and that is the track we talked about, where suddenly you can see that the interest, no, not the interest and not the principal, meaning you are left with the same, with more, not just the same amount, but even more. Why? Because once it changes, it can also just change upwards. And if you barely paid off the principal, then to the remaining principal they add more; you took 200 thousand shekels, it went down to 190 somehow, but now they added another one and a half percent, that's it, it jumps back to 200. >> Right, right, you are absolutely correct , and that is why we really use that mix of three tracks, because as you say, it will keep a fixed interest rate to protect me from those interest rate fluctuations; if there are hikes or drops, I benefit, and that is why these are the three tracks. >> It's a bit like the stock market, where we say it's better to diversify the investment to get the best of all worlds . So here too, when you—it's basically you buying some financial product, yes, a financial loan, and you want to know somehow that you can manage in a normal way, so you hedge yourself in all sorts of places so that it really fits the global and economic conduct here in the country, the economic conduct in the world, and various fluctuations that protect you in the end. >> Right, right, so to your question, I am sure you want to ask, and surely the viewers and listeners are also asking, what is the most popular track? >> Well, popular is whatever suits each person according to... >> True, true, but generally speaking, when you look at it, you don't necessarily do a third-third-third, but usually, people take a third non-linked fixed, a third variable interest, and a third the prime . Alright? These are effectively the tracks, but as you say, each one is built according to what suits them, according to their needs, according to their repayment ability. Another thing important to emphasize before we finish is that just because you start with a low repayment, it doesn't mean that there isn't a very, very high repayment waiting for you later on, or certainly towards the end. So you need to know that often they show a person, "Listen, what do you want?""It's very low relative to the offer you received." So the first thing you must always know is to compare apples to apples when you go to do a survey, and you should, because I told you, it’s a money supermarket. Look at the total component, how much you pay for every shekel. Check the same thing you are asking about, check the same tracks at several banks, and then you will really see who is actually giving you...Here, listen to a story: yesterday an agent called me. I took out a mortgage a few weeks ago for something I did, and that guy from the insurance company called me. It’s not—it’s not—it’s not the same thing, but it’s very, very similar, the insurance company guy called me, saying : "We saw you took a mortgage and you need to get, as is known, you need to get life insurance, maybe yes, we'll talk about that in a moment, you need to get life insurance so that..." >> Right, in case heaven forbid something happens... >> So I told him, "I already have, yes, I already had life insurance, I appraised it and checked what was needed for the bank, and so on and so forth," he says to me, "Yes, but let me make you an offer," I told him, "With pleasure," long story short, he sends me an offer to my email, told me, "I'll call you back tomorrow morning," I look, and what do I discover? >> Okay. >> He comes, he sold me: "Listen, here, I'm lowering your...lowering your cost by half and..." I look, it's not the same policy. I—my policy for the sake of the example is two million shekels, yes? A million mortgaged, another million shekels in some monthly insurance, all kinds of...and he only finds me, only the bank's option, a million. He lowered me by...sure, he cut the policy in half , so the cost was actually even more than half, it was basically more expensive. So here too, when we come to measure mortgages, often, sometimes, they try to make us just: look only at the repayment, look only at the...at the ...at this. That’s everything, you need to look at all the components, and then first of all understand if it suits you or not. And after you understand what suits you and what doesn't, again, like you say: compare apples to apples. You compare monthly payment to monthly payment, over the same amount of time, and with the same...and with the same principal, and same form, and with... >> Right, right. >> Now, again, it's very important, I say, whoever really now, surely after you've listened and heard, you're all experts and can do it yourselves—not that I'm disparaging, listen, our public is very intelligent, understands the event, you can go even when it comes to money, there's awareness. >> Yes, but you can do it yourselves after all, but again, whoever wants to go to an advisor, it's often worth it, because again, you need to understand how the system works, as we said, it’s trade, it's buying and selling, so just like as a grocery store you buy from Tnuva you'll get a certain price, but a huge supermarket gets a better price, therefore I think it's worth it to... >> He also has an advantage in knowledge. >> Also, exactly, knowledge. >> Certainly, he has a lot of knowledge, he has a lot of solutions he can solve for you, all kinds of... >> He also really works for your interest. >> The bank ultimately works for itself, it needs you, and the bank might give things to him that it won't give you, and indeed there is a very, very, very big advantage to an advisor—the knowledge, the price he gets, again, because call him a big wholesaler, so it's worth it, it's worth it, you don't see people, I think there's someone who doesn't...who doesn't take [one], I hear people, the system, I don't... >> I'm not doing an advertisement, I'm just saying I hear people doing the math, wait, I'm now paying, okay, what you pay the advisor, know that your savings, your savings are tenfold, think in the long run if he really got you the right deal and knows how to tailor the loan for you, then it's worth it to you, and those 8,000, 9,000, whatever you pay him , it's worth it. >> I recommend you do a simple exercise: first get an offer from the bank and calculate how much money you... >> There's in that, I think there is with that, no, again, I don't understand it fully, but it seems to me, it seems to me that if you go to the bank and you already submit and start getting offers ... >> Well, get an approval in principle with a mortgage offer, understand how much ...let's understand, understand how much you're paying on every shekel, and then go to a mortgage advisor, compare. You will discover, I am sure you will discover, that the mortgage advisor will manage to lower it for you significantly . Now, he is the professional, he knows , but I say: the goal here in this episode is actually for you to have that basic knowledge, so that when he talks to you, and tries to explain the mix and the composition and the debt-to-income ratio, you'll know what he's talking about, how the system works, and our mindset. Whoever really wants to delve deeper—by all means, good luck to them. >> May everyone make good business. >> Tell me, just one last question, I’m curious. >> How do you think this mortgage system in Israel compares to the rest of the world ? Because first of all, I know there are countries where it's not common to take a mortgage, for example Romania; in Romania it’s not really, I spoke to someone there recently, so how do they buy? >> You save money and buy what you have. >> Yes, exactly like that, it’s not— culturally it’s not like that at all. And I’m just curious, let's say, compared to the United States or major European countries, is the interest rate here, the conditions here, and the banking system here fair to the customer ? It's very, very similar if you're talking specifically about the U.S.; it's quite similar. Meaning, in terms of interest rate composition, it's relatively very similar. Again, there are changes, let's not get into that. It's very—for example, since you asked, in London, England, they have an amazing repayment mechanism, by the way, where you can pay back only interest. We know this here as grace loans, okay? Bullet, balloon. Right? >> There, you can decide in advance that for your entire mortgage, you pay only interest. >> And then what? You reach 20 years later and you change everything? >> No, no, there is no everything. You have a property; you bought a property, let's say, for a million shekels—a million pounds, it doesn't matter, a million shekels. >> You don't pay a principal component plus interest; you pay interest, interest, interest. Now you rent out the property , you have income; you just need to ensure the rental yield is higher than the interest. >> The principal—when you sell the property , you pay back the principal, but it gives you the ability... >> To develop very quickly, you understand ? >> Wow, I didn't think of that. >> By the way, can you do that in Israel? >> No, what, no way, there's no such thing . >> Why? They give you a grace loan, okay? Grace, yes. >> But with grace, you have to pay it back in a maximum of two years, that's it. What, no way, maximum two years, and you have to pay it back and show him how you're paying it back and sell—man, that's a headache, and the interest is relatively very high. You don't get mortgage interest rates there; there, you get a mortgage interest rate, and you can request that the whole plan be interest-only, by the way. >> Well, that explains a lot about the market. You want to hear more? In Switzerland, what’s the interest rate? >> How much? >> I'm just throwing it out there, I’m not an expert, but interest—correct me if I’m wrong—maybe one percent is the rate you’d get for a mortgage. Wow. >> Where’s the catch? >> That you have to be a resident; you can’t get it from outside. >> Well, there are a lot of things there. >> But still, think about it—you get... well, there are solutions, forget it, there are solutions in the United Arab Emirates, in Qatar, where you get a free apartment and such. >> I don't know, I'm not familiar. I'm telling you about Switzerland. I know in Qatar there’s no VAT; I was there in Qatar, there’s no, no VAT, you arrive, there’s no such thing as VAT. >> So Shams, people do it either through someone local or a company, it doesn't matter, but the idea is to understand how an entire country works with such a system. Then you have almost no risk; how much interest do you pay? One percent, and I think even less than that , less than a percent. >> Also, deals, what kind of deals? In Israel, huge deals...a 3%deal is already a good deal if it’s in the periphery, a Swiss citizen needs... >> Right, or that’s it, so check if maybe a grandfather or a grandmother, something , you can do it through a Swiss person and you're set. >> That’s just it, that’s the problem, no one was ever there. >> Yossel, say Shabbat Shalom, we always meet before Shabbat, when it comes out, so say Shabbat Shalom, good luck to everyone, and see you in the next episodes, all the best, God willing, Amen. >> You've been listening to "Osek Ovish" from Mishpacha Podcasts. I'm Yossi Pali . Thanks to content editor Tehila Siton , production manager Ayala Goldstein, and sound and video editors Avri Wizel, Daniel Levin, and Ayala Willem. All series and episodes are waiting for you on the Mishpacha website, in all podcast apps, and on the phone line 077-2200. Extension 66, see you in the next episodes.