In October 2012, the Bank of Israel dropped a "bomb" on the mortgage world.With the hope of reducing demand for apartments and consequently apartment prices, the Bank of Israel has set limitations on taking out mortgages. The details of the limitations can be read In an article I wrote on the subject.The main "damage" caused by these restrictions has been to real estate investors, who have been forced to settle for 50% in bank financing instead of 75%, as was the case prior to this restriction.Lately, I’ve been coming across various people offering methods and "tricks" to get around the Bank of Israel’s restrictions. I even received an email from a real estate agent who claimed to have found a "secret method" to secure 70% financing for an investment property instead of 50% financing.The method is simple: to determine whether a purchased apartment is an investment property (50% financing) or a property intended for upgrading one’s living situation (70% financing), that is, an apartment purchased for the borrower’s own residence, the bank requires the borrower to provide a sworn statement before a lawyer in which the borrower undertakes to sell their current residence after purchasing the new apartment.Thus, the new apartment is not considered an investment property (as noted, 50% financing is available) but rather a property for the purpose of improving housing conditions (70% financing is available).Of course, after purchasing the new apartment with high financing, no one verifies if the borrower has actually sold their residence. Ostensibly, it's an excellent WIN-WIN solution. The bank lends a larger sum, the borrower can purchase an apartment with greater financing and invest more, and the real estate agent, of course, gets an extra cut.There are friends who say that bankers themselves recommended this method to them. The only thing all the various "advice givers" forgot, or weren't interested in telling the naive borrower, is this.Why is the borrower actually required to make a declaration before a lawyer? After all, the banker himself could ask, "Do you intend to sell your current residence?"No one assumes a lawyer can detect a lie. However, swearing an affidavit before a lawyer serves a different purpose. The lawyer is supposed to warn the borrower before the affidavit that making a false statement is a criminal offense.If years from now, authorities decide to investigate and locate all those who made false declarations, there's a good chance they will be accused of obtaining something by fraud.A statement before a lawyer is intended to prevent a situation where the borrower says, 'I didn't really mean it," "I didn't know," "I didn't understand," "It wasn't me, it was my wife," etc. You signed a false statement, and one day you may pay a criminal and financial price.Or as it is said in Psalms Chapter 1:א Happy is the man who does not walk in the counsel of the wicked; He does not stand in the path of sinners, nor does he sit in the seat of mockers.
Hello Pomegranate I read the interesting article you wrote. In my opinion, there is no criminal implication to such a statement, because the declarant could claim that they intended to sell but didn't get the price they wanted, or they regretted it, and so on and so forth. We have already seen something similar in the statement on property taxation, concerning the purchase tax on a second apartment that is purchased, where someone who declares that they will sell their first apartment within about two years is exempt from purchase tax on the second apartment. What happens if he doesn't sell the first apartment within two years? 😯 He's being hit with acquisition tax with linkage and interest, the kind that are supposed to discourage him from doing it again 😥 But no criminal proceedings are being conducted against him, as far as I know. GreetingsReply
Hello and thank you very much for your response. There is a difference between "there is no criminal significance" as you wrote and "he could argue..." . Even according to what you wrote, the described act has criminal significance, but whoever sues in court will be able to claim that they did not have criminal intent, and so on. Additionally, you wrote, and I agree, that the authorities have ways to punish a person even without bringing them to trial (excess interest, heavy fines, etc.). For the average citizen, the very act of corresponding with authorities, let alone appearing in court, is a punishment in itself, even if the verdict is lenient. The outcome of the (expensive) process is an acquittal.On the bottom line, I think we agree: it's better to abide by the law.Thanks again for the response.Reply
Hello Rimon, I wanted to ask. According to you, an investment apartment is an additional arena to the existing apartment. The question is whether a first apartment that the owner "will not live in" is subject to the law of an investment property (lower financing) or a regular apartment (higher financing).Reply
Hello Zvika, Thanks for reading. Regarding the financing percentage, the only test for distinguishing between an investment property and a residence is whether it is a first or second home. In any case, it's impossible to know if you'll live there in the future.Good luck.Reply