Loan period (“tekufat ha-halva’a”)
In the proposed composition, the loan period will be chosen by the customer, and in any case shall not exceed 30 years. In the uniform compositions, the customer will have the option of choosing one of the following periods: 10 years, 15 years, 20 years, 25 years, or 30 years.
Basis point (“nekudat basis”)
One-hundredth of one percent, 0.01%.
Fixed rate, unindexed (“K’vuah, lo-tzemudah”)
The monthly payment is established in the beginning, when taking the loan. It remains fixed and does not change throughout the life of the loan.
Fixed rate, CPI-indexed (“K’vuah, tzemudah”)
The interest rate is established in the beginning, when taking the loan. However, the principal (the amount of the loan, excluding interest) is linked to the Consumer Price Index (CPI) and is updated on an ongoing basis in accordance with changes in it. It thus affects the amount of the monthly payment, such that an increase of 1 percent raises the monthly repayment on this track accordingly, by 1 percent.
Variable rate, based on prime (“Mishtanah al basis ribit ha-prime”)
In this track, the principal is not linked to the CPI and the payment is based on the prime rate. The prime rate is the Bank of Israel interest rate, determined and published by the Bank of Israel’s Monetary Committee 8 times per year, plus a fixed addition of 1.5 percentage points. Thus, for example, if the Bank of Israel interest rate is 1 percent, the prime rate will be 2.5 percent. On the interest rate track that is linked to the prime rate, the interest rate on a mortgage loan is determined based on the prime interest rate with a negative or positive spread (supplement).
Variable rate, CPI-indexed (“Mishtanah tzemudah”)
This is a loan bearing an interest rate that is fixed for a period of several years (usually 5 years), and at the end of every period that was set, the interest rate will change in accordance with a fixed formula called the “anchor”. The anchor is a parameter that was agreed upon in advance to serve as the base. In the uniform composition, the base is the return on government bonds. Every 5 years, in accordance with the rate of change, the interest rate goes up or down accordingly. In this track, the principal is indexed to the CPI (Consumer Price Index) and is updated in line with changes in it, so that also affects the amount of the monthly payment.
Variable rate, unindexed (“Mishtanah, lo-tzemudah”)
This is a loan bearing an interest rate that is fixed for a period of several years (usually 5 years), and at the end of every period that was set, the interest rate will change in accordance with a fixed formula called the “anchor”. When the period ends, in accordance with the rate of change, the interest rate increases or decreases. In contrast to the variable rate, CPI-indexed track, in this track the principal is not linked to the CPI.
Shopping for a mortgage offer (“Tichur”)
Receiving pricing offers from several entities (and comparing them, in order to choose the most appropriate offer for the borrower, and to lower costs.
Loan to value (LTV) ratio (“Shiur mimun”)
The ratio of the approved facility at the time it is granted to the value of the asset, as approved by the bank when the facility is granted and as calculated for capital adequacy and measurement. In any case, the value of the asset shall not exceed the lower of the assessor’s valuation and the asset’s cost in the purchase contract, or the expected cost of the asset under construction, or with a buyers group.
Amortization table according to the Spitzer method (“Luach silukin le-fi shitat Spitzer”)
A table that details the gradual paying down of the debt, and based on a fixed monthly payment (except for indexation differentials, if there are any) over the entire course of the loan period. At the beginning of the period, the interest component in each payment is high, and it declines with each payment, and in parallel the principal component in the payments increases over time.
Approval in principle (“Ishur Ekroni”)
An approval in principle is a mortgage offer including: identification details of the borrower, the 3 uniform compositions and the additional proposed composition with details of the amounts and interest rates offered, and additional variables such as: the total forecast interest, the amount of the first monthly repayment, the highest expected monthly payment based on the forecasts, and the total amount expected to be paid over the life of the loan.
Single home (“dirah yehida”)
A residential home purchased by an Israeli citizen, for whom it is the only home in Israel.
Replacement home (“dirah hilufit”)
A residential home purchased by an Israeli citizen, who owns a residential home (that would serve as a single home other than the home being purchased), and in which case the borrower commits to selling the existing home in line with the provisions of Section 9 of the Property Taxation Law.
Investment home (“dirah le-hashka-ah”)
A residential home that is neither a single home nor a replacement home.
Payment to income (PTI) ratio (“shiur hechzer meh-ha-hachnasa”)
The ratio of the monthly repayment in respect of the mortgage loan and the fixed monthly net income net of fixed expenses.
Fixed expenses are monthly payments in respect of undertakings (loans or alimony/palimony) of the borrower that have a remaining term exceeding 18 months.
Total forecast interest (“haribit hakolelet hachazuya”)
This will be presented in each one of the proposed compositions, and reflects the expected rate of interest over the entire course of the life of the loan in line with the forecasts derived from the capital market as published by the Bank of Israel.
The base amount of the loan, excluding interest.
Indexation differentials (“hefreshei hatzmada”)
The differentials created as a result of changes in the CPI or in the value of foreign currency relative to the value on the date the transaction is executed.
Government bonds (“agach memshaltiyot”)
An interest bearing security, issued by the government, representing its commitment to pay the bond holder the principal that was issued plus coupon interest payments on set payment dates. This is the financial instrument through which the government can borrow money from the public.
Mortgage refinancing (“michzor mashkanta”)
This is the repayment of a mortgage loan by taking out another mortgage loan.
Assessor’s valuation (“ha-arachat shamai”)
An assessor’s valuation is the assessment of the asset’s value by a certified assessor.
Market survey (“seker shuk”)
This is a comparison of various mortgage offers received from various lending entities, and examining their worthwhileness in accordance with the relevant parameters: the first monthly payment, the interest rate level, the amount of the forecast repayment over the course of the loan period, the interest rate level forecast over the life of the loan, etc.
A mix of two or more tracks. A track is defined as all or part of the mortgage loan, which will be returned with the addition of interest of various types, from among the various interest options. For example, a fixed interest rate, unindexed track.
The rate of change in the CPI. It means a continued process of rising prices. (The opposite is deflation, a continued process of decline in the CPI).
Grace loan (“halva’at grace”)
A loan in which the principal payment, and at times the first interest payment as well, is deferred to a specific date during the loan period.
Balloon loan (“halva’at balloon”)
A loan in which over the course of the loan period only interest is paid, while the principal is repaid in full at the end of the period. Sometimes the interest is also paid at the end of the period.
Credit rating (“dirug ashrai”)
A score determined in accordance with a fixed model and via the credit data sharing system. The credit rating is used by the bank when examining a loan request in order to assess the borrower’s financial conduct.