Equity and cash flow: the numbers the Bank of Israel set, and the schedule the developer set

Most people buying an apartment calculate one number: how much money they have. That is the least useful number. The useful ones are two others — what share the bank is permitted to lend, and on what schedule the money will be called.

What the Bank of Israel set — the directive itself

Financing limits are not a decision of the branch across the street. They are fixed in Proper Conduct of Banking Business Directive 329 of the Banking Supervision Department at the Bank of Israel, and they bind every bank:

So minimum equity is not a choice: it is 25% for a single apartment, 30% for a replacement apartment and 50% for an investment apartment. Which of the three applies to you is a question in its own right, settled with the bank and the Tax Authority rather than at the sales office.

Clarification: Directive 329 binds the banks, but it does not require a bank to approve a loan at the maximum ratio. 75% is the ceiling, not an entitlement. What is actually approved is decided in underwriting, on income, history and collateral.

The repayment ratio: 40% is the real line

The formal ceiling on repayment-to-income is 50%, but the practical line sits at 40%: above 40% the directive requires the bank to assign a 100% risk weight to the loan. A bank required to hold more capital against a loan will price it differently or decline it. 40%, not 50%, is the number that runs the conversation.

The second schedule: when the developer asks

A transaction in a building under construction is not a single payment. Payments follow the execution stages rather than a fixed calendar, so they are not known precisely in advance. What is known is the rule fixing when a payment may be demanded, and how much. Explained in full in the article on the payment schedule.

Two cash-flow points that surprise buyers:

• The first 7% — up to 7% of the price may be paid before any security obligation arises. Above that, one of the five securities is required. Explained in the article on the seven per cent.
• Index linkage — future payments are linked to the construction inputs index by default, so the sum called in two years is not the sum written today. Explained in the article on the construction inputs index.

What does not count as equity but does leave the pocket

1. Purchase tax — by bracket. Explained in the article on purchase tax.
2. Legal expenses — the sum a developer may charge is capped by regulation and covers registration only. Explained in the article on your own lawyer.
3. Your own lawyer — a separate cost, not part of the sum the developer charges.
4. Fees, extracts and mortgage registration — not included in the developer's charge.
5. A valuer — required by the bank for the loan.
6. Variations and additions — every change from the specification is a separate agreement with separate pricing.

The right order to check

1. Establish the category — single, replacement or investment. That fixes 75%, 70% or 50%.
2. Compute the repayment against 40%, not 50%.
3. Ask for the project's payment schedule — before signing, not after.
4. Cross-check the schedule against the pre-approval — how much of the money is called before the mortgage opens at all.
5. Add the costs outside the price — purchase tax, lawyer, fees, valuer.

Payment schedules for Tawfik Zidan Ltd projects are available together with the specification through the contact page.

Clarification: this article presents figures from Directive 329 and explains a framework; it is not financial or mortgage advice. A financing decision is taken with the bank and a licensed adviser, on your own figures.