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The Challenge: Property Wealth Without Liquidity
A Common Scenario
The Cohen family from Tel Aviv: Their property is valued at $700,000, with only $225,000 remaining on the mortgage. On paper - substantial wealth. However, their daughter needs $85,000 for a down payment on her first home. No liquid capital available.
Suboptimal: Depleting Retirement Savings
Withdrawing $85,000 from pension funds means losing your financial safety net. At ages 60-70, this presents significant risk.
+ Potential tax implications on early withdrawal (up to 25%)
Risky: "We will sell the property"
Selling property that appreciates 5-7% annually? Not advisable. This is your most valuable asset.
+ Where would you relocate? Rental costs would consume your budget.
The Solution: Home Equity Release (Directive 451 - 70% LTV)
What is Bank of Israel Directive 451?
The Bank of Israel converted a temporary provision (originally set to expire in 2024) into a permanent regulation. This means: You can now access up to 70% of your property value for any purpose (not limited to property purchase).
The portion above 50% is capped at approximately $55,000
In practice: You can access up to 50% without limit + an additional 20% (up to the cap).
Practical Example: The Cohen Family
Sufficient to assist daughter ($85K) + consolidate existing debts ($55K) + retain reserves
Monthly Cost
Standard mortgage of $265K at 4.5% over 25 years:
~$1,480/month
(Rather than depleting $85K in savings!)
Want to understand all the strategies?
Assisting children is one component of comprehensive family wealth planning. Explore our Family Wealth Management services - including asset leverage, living inheritance strategies, and tax optimization.
The Trap: Why Banks May Recommend Reverse Mortgages
The Bank's Conflict of Interest
Bank representatives are incentivized to sell high-margin products. Reverse Mortgages are among the most profitable products for banks - and therefore the most expensive for clients.
What is a Reverse Mortgage?
A reverse mortgage allows you to access home equity without making any payments until you sell or pass away. Sounds ideal? Consider the cost:
The True Cost
- • Higher Interest Rate: 6-8% (vs. 4-5% for standard mortgages)
- • Compound Interest: The debt grows daily while you make no payments
- • Annual Fees: 1-2% of balance per year
- • Origination Fees: Up to 3% of loan amount
Comparison: Reverse Mortgage vs. Standard Mortgage
The RealFix Approach: Absolute Client Advocacy
Banks represent their interests. We represent yours. RealFix is not incentivized by product sales. Our fee structure is identical whether you choose a standard mortgage or reverse mortgage - therefore our only interest is what benefits you most.
Alternative Options for Assisting Children
Option 1: Child Takes Mortgage + Parents as Guarantors
How it works: Your child secures the mortgage in their name, with parents providing either guarantor support or down payment funds.
Advantage: Child builds credit history. Property is in their name (future inheritance).
Option 2: Joint Purchase (Parents + Child)
How it works: Property is registered jointly (50%-50% or 25%-75%). Mortgage is shared.
Advantage: Access to larger mortgage (combined incomes). Child can "buy out" parents later.
Option 3: Private Family Loan
How it works: You access equity (standard mortgage), then provide funds to your child as a "private loan" with a repayment agreement.
Advantage: Complete flexibility in repayment terms. Can convert to gift in the future.
Israel Residents Only
Directive 451 and Israeli mortgage regulations apply to Israeli citizens and permanent residents with properties in Israel. Have family in Israel who might benefit? Share this guide with them.
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Legal Disclaimer
The information and simulations presented on this website are for illustrative purposes only and do not constitute a binding offer for credit or financial advice. Credit Approval: Subject to final underwriting, clean credit data (positive credit score), clean banking history, and meeting the threshold requirements of the financing institutions. Interest Rates: The interest rates displayed are estimates only, based on average market data, and may change at any time according to the client's individual risk profile and economic conditions (Bank of Israel interest rate changes / CPI). No Commitment: RealFix does not guarantee loan approval or the terms displayed in the calculator. E&OE.
