I spoke with a potential client. For convenience, let's call him Yam (a pseudonym). Yam explained that he needs a small mortgage to be repaid in five years. I advised him not to take a mortgage at all. Instead of a mortgage, I recommended he take a regular loan. A regular loan can sometimes be obtained from the bank via a phone call. Yam raised an eyebrow and asked for the reason behind my recommendation: a regular loan (a commercial loan) is given on less favorable terms than a mortgage. I answered him: it depends on how you calculate it. There are many additional costs associated with a mortgage (and added emotional stress and hassle) that are unknown to those who are inexperienced.For the sake of example, let's compare the prime rate component of a mortgage (a commercial loan is a prime-linked loan). A small, short-term mortgage can be obtained at prime minus one (P-1%). In contrast, with a commercial loan, a good customer can get a rate of prime minus half a percent (P-0.5%). On the surface, it seems that the mortgage terms are better. On the surface. Let’s calculate the benefit in shekels (since you can’t use percentages at the grocery store). A regular customer can get a loan at a higher interest rate. I compared a non-indexed mortgage at 3.51% per annum, a commercial loan for a good customer at 4.1% per annum, and a commercial loan for a regular customer at 5.1% per annum.According to the calculation: the total cost of taking a mortgage (in addition to repayment payments) is NIS 8,650 (a large part of the cost stems from life insurance for both spouses that must be taken out when taking a mortgage). If we examine the difference in monthly payments between commercial loans (for both a good client and a regular client), we find that they are still more worthwhile than a mortgage.It should be added that a mortgage is a loan, the taking of which causes significant psychological stress and further involvement with many parties, including the seller of the apartment, who is required to sign various approvals on our behalf that will allow us to register a cautionary notice in favor of the bank. .The full calculation can be seen in the Excel file I built. Click here to view the Excel file.