Mortgage mix: how to build the right combination for you
A mortgage mix combines different loan tracks and affects your payment, certainty and total cost over the years. This page explains how to build a mix that suits your repayment capacity and life plans, while balancing stability, flexibility and risk.
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A mortgage mixThe combination of several different interest-rate tracks within the same mortgage in order to diversify risk. is the way you divide the loan amount among different tracks. There is no single mix that suits everyone. A sound mix balances stability, flexibility and cost and matches 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 mortgageA long-term loan for purchasing a property, with the property serving as collateral for the bank., you do not choose only one track. Instead, the loan is divided into several portions, with each portion assigned to a different track—for example, part at the prime rateA base interest rate consisting of the Bank of Israel interest rate plus 1.5%. and part at a fixed rateA fixed interest rate; however, if the loan is index-linked, the debt will change according to inflation.. This combination is called the mortgage mix.
An important rule of thumb: repayment-to-income ratio
Before examining the tracks, determine how much you can repay each month without putting your finances under excessive strain.
Do not accept a ready-made mix from the bank
When you approach a bank for a mortgage, it may propose a particular mix.
Before signing, ask yourselves:
Questions worth examining
- Could the monthly payment rise sharply in the future?
- How would an increase in interest rates or the index affect our total debt?
- Can we repay some of the tracks without penalties, or an early-repayment fee?
Tailoring the mix to your life plans
A good mix is determined not only by today's interest rates but also by what may happen to you in 5, 10 and 20 years:
- Moving to a better home: Do you plan to sell the apartment and buy a larger one soon?
- Higher income: 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 become liquid, or is your salary expected to rise?
- Family preferences: Is a rock-solid payment important to you, or are you prepared to take some risk to pay less now?
Example mortgage mix—a young couple, NIS 1 million
This is only an example illustrating the allocation. The actual mix must change according to your personal circumstances:
Allocation of the mix
| Track | Amount | Purpose |
|---|---|---|
| Unlinked fixed interest | NIS 400,000 | Stable payment and complete certainty. |
| Prime interest | NIS 300,000 | Flexibility and the ability to repay without penalties. |
| Variable interest | NIS 300,000 | Lower initial interest rate. |
Compare and choose carefully
The Bank of Israel publishes monthly data about the interest rates and mortgage tracks offered by the banks to make comparison easier and clearer.
Before choosing a mortgage, review the current terms offered by different banks and examine how each track could affect your payment and total cost.
The bottom line
There is no single mix that suits everyone.
- What is it?
- A strategy for dividing the loan among several tracks to balance risks.
- What is it not?
- A random choice of tracks simply because "the banker said so."
- Who is it for?
- Anyone taking out a mortgage who wants control over their financial future.
- Main advantage
- It can be tailored to future plans and repayment capacity.
- Main disadvantage
- It requires a thorough understanding of each track before the combination is built.
Frequently asked questions
Does the bank determine the mortgage mix?
No. The bank makes an initial proposal, but you have the right—and it is highly advisable—to examine other tracks or change the allocation among them.
Should I take a mortgage using only one track?
Generally not. Diversifying among several tracks helps protect you: one portion of the mortgage may protect you from inflation, while another gives 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
The mortgage mix is one of the factors with the greatest effect 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 that you can afford even if the market changes.
Every mix involves compromises among several central factors:
- Stability versus cost - Flexibility versus certainty - Risk level versus the monthly payment
The important question is therefore not which mix is best, but which mix suits your financial circumstances and future plans.