Mortgage Mix: How to Build One That Suits You
A mortgage mix combines different loan tracks and affects the repayment amount, level of certainty, and overall cost over the years. On this page, we explain how to build a mix that suits your repayment capacity and life plans, and how to properly balance stability, flexibility, and risk.
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A mortgage mix is how you divide the loan amount among different tracks. There is no one mix that suits everyone—a suitable mix balances stability, flexibility, and cost, and fits your repayment capacityThe maximum monthly amount you can allocate to mortgage repayments without harming your standard of living. and financial plans.
What is a mortgage mix?
When you take out a mortgage, you do not choose just one track. Instead, the loan amount is divided into several parts, with each part in a different track (for example, one part at the Prime rateA base interest rate consisting of the Bank of Israel interest rate plus 1.5%. and another at Ribit Kvu'a (ריבית קבועה)A fixed interest rate; however, if the loan is index-linked, the debt will change according to inflation.). This combination is called a mix.
An important rule of thumb: the repayment-to-income ratio
Before diving into the tracks, it is important to understand how much you can repay each month without overstretching yourselves.
Do not take a “ready-made” mix from the bank
When applying to a bank for a mortgage, the bank may offer a particular mix.
Before signing, ask yourselves:
Questions to consider
- Could the monthly repayment jump in the future?
- How would an interest rate increase or an increase in the index affect our total debt?
- Will we be able to repay part of the tracks without penalties (an "Early repayment feeA penalty charged for repaying the mortgage before the agreed time.")?
Aligning the mix with your life plans
A good mix is determined not only by today's interest rates, but also by what will happen in 5, 10, and 20 years:
- Moving up: Are you planning to sell the apartment and buy a larger one soon?
- Income increase: Is a Keren Hishtalmut (קרן השתלמות)A medium-term savings product (six years) that benefits from a tax exemption on investment gains up to the applicable contribution limit. expected to mature, or do you expect a salary increase?
- Family preferences: Is a rock-solid, stable payment important to you, or are you willing to take some risk in order to pay less now?
Example of a mortgage mix (young couple, NIS 1 million)
This is only an example to illustrate the allocation. The actual mix must vary according to your personal circumstances:
Mix allocation
| Track | Amount | Purpose of the track |
|---|---|---|
| Ribit Kvu'a Lo Tzmuda (KALATZ) (ריבית קבועה לא צמודה (קל"צ))A track in which the interest rate and repayment remain fixed, regardless of the index or the market. | 400,000 ₪ | Payment stability and complete certainty. |
| Prime rate | 300,000 ₪ | Flexibility and the option to repay without penalties. |
| Ribit Mishtana (ריבית משתנה)An interest rate that is updated at predetermined points in time according to an external benchmark. | 300,000 ₪ | Low initial interest rate. |
Compare and choose wisely
The Bank of Israel publishes monthly data on the interest rates and mortgage tracks offered by banks, enabling you to compare them simply and clearly. We have compiled the data for you on a dedicated comparison page.
Before choosing a mortgage, it is advisable to review the table we created for you, based on the Bank of Israel's "Comparison Line" data, and compare the interest rates offered by different banks.
Bottom line
There is no one mix that suits everyone.
- What is it, then?
- A strategy for dividing the loan among several tracks to balance risks.
- What is it not?
- A random selection of tracks because "that is what the banker said."
- Who is it suitable for?
- Anyone taking out a mortgage who wants control over their financial future.
- The main advantage
- Allows customization to future plans and repayment capacity.
- The main drawback
- Requires an in-depth understanding of each track before building the mix.
Frequently asked questions
Does the bank determine the mix?
No. The bank provides an initial offer, but you have the right, and it is highly recommended, to examine other tracks or change the allocation between them.
Is it advisable to take out a mortgage in only one track?
Usually not. Diversifying across several tracks allows you to protect yourselves: part of the mortgage will protect you against inflation, and another part will give you flexibility to refinance in the future.
What is the difference between a track and a mix?
A track is one type of loan within the mortgage.
A mix is the combination of several different tracks.
In summary,
A mortgage mix is one of the factors that will have the greatest impact on your finances over the years. The goal is not merely to "beat the bank" on today's interest rate, but to build a mortgage you can afford even if market conditions change.
Every mix involves a trade-off between several key factors:
- Stability versus cost - Flexibility versus certainty - Risk level versus monthly repayment amount
Therefore, the important question is not which mix is best, but which mix suits your financial situation and future plans.