How to buy a property when you don’t have the money

If you are not a proud owner of a very large sum of money, but you do earn a stable monthly income, we have a few advices and ideas for you, to help you achieve your goal, whether it is buying a house to have yourself a home, or invest in Real Estate.

Before, though, a little request! Do not skip the warning light at the end of this article.

Buying a property without having the down payment:  

1. Pawn a family member’s property

If one of your family members has his own property, you may consider a leverage: pawning a family member’s property to the mortgage bank. The bank will give you a loan that is up to 50% of the mortgaged property’s value. If this money alone is not enough for purchasing your desired property, you can now, with this money, go to the mortgage bank and get a loan that is up to 75% of the desired property’s value.

To your attention!

• You can only pawn a property owned by a member of a conjugal family: parents, children and siblings.
• The mortgage bank will pawn a property only if you have a stable credit history and are not on the restricted accounts list of the Bank of Israel.
• If the mortgage of the property that you wish to pawn has not been fully paid yet by it’s owners, you will receive a loan that is 50% of the property’s value, minus the some of the property's mortgage that haven't been paid.
• Combining the two mortgage loans will generate a very high monthly mortgage payment. Make sure you are capable of paying such amounts on a monthly basis. To learn more about mortgages, click here.
  
  

2. Purchase a cheaper property in order to fund the desired one

In other words: invest in Real Estate.

Search for a market that is growing, find a property which you can fund 25% of its value, get a mortgage on the other 75% and buy the property. If you don’t have 25% of the value and thus can’t get a mortgage loan, consider pawning a family member’s property (as explained above), or combining a few loans (from a commercial bank, your workplace or a training fund).

• After purchasing the property, rent it out for a few years, in a price higher than the loan payments. During those years, you will make a nice monthly income out of the property and it’s value will gradually rise.
• Upgrade the property in order to raise it’s value even more (you can learn how to do it here).
• Sell it and use the profit to get a mortgage for the property you wish to purchase.
  
  

3. “Mehir la mishtacken” governmental project

“Mehir la mishtacken” is a project that the government initiated in order to make it easier for young couples to buy a house. Those entitled of participating, will receive a discount of about 200,000 nis for a new apartment that will be built for the project.

Additionally, the participants of the project get a higher mortgage: The mortgage banks give loans for up to 75% of a property’s value. Owing to the fact that the banks determine the apartments value according to their market value and not the price that the project’s participants have to pay, for them, the 75% turns out to be about 90% of the price.

keep in mind that the apartment that you purchase will be delivered after a few years, when the construction will be completed. During those years, you will have to pay for the mortgage, in addition to the rent you are paying for your current residence.

Additionally, “Mehir la mishtacken” is a new project that has yet to be proven. Furthermore, the demand for apartments is much higher than the supply, and only a small percent of those applying would actually participate in the project.

If you want to learn more about “Mehir la mishtacken” project, it’s pros and cons and who is entitled to participate in the project, click here.

Warning light!

Don’t take a loan in order to show the bank that you have the required equity to get a mortgage loan. The mortgage bank will ask to see your checking account history and will know that you do not have the equity.

This article basically gives you a 100% fund solution - a dangerous strategy. If you are not a very thrifty person, not occupationally stable, or expecting changes in your income or expenses, you better think twice before you buy a property without the equity required. If you won’t be able to pay the monthly payments, your property (or your family member’s property that you have pawned), will be confiscated.

On a final note, We advise you to consult a mortgage expert before taking on yourselves such a financial obligation.