Here's a secret you already know: every seller wants to sell their goods at a high price.The merchant's costs are at their lowest possible level after he has streamlined as much as he can. Now, the higher the price he can sell his goods for, the wealthier he will become.It seems I haven't taught anyone much in the first paragraph. Why is it that when we talk about a shoe salesman or a falafel vendor, the sentence above seems natural, but when we talk about a bank, people think there's a different life principle at play? Well, there isn't. A bank is a dealer in money and wants to get the most money for the money it sells. It's a bit confusing to say they sell us money and we pay with money, but if we think about mortgages and interest, we'll discover that's exactly what's happening: we receive (buy) a large sum of money when taking out a mortgage, and then each month we repay a portion of the debt and pay interest on the part we haven't repaid.In other words, we can say that every month we buy an amount of money equal to the debt and pay interest on it of, say, 3%/12 = 0.0025 of our debt. If we have a debt of 100,000 shekels. We can say that we bought 100,000 shekels at a price of 0.0025*100,000 = 250 shekels. The following month, the debt will be, say, 99,000 shekels, which we bought for 0.0025*99,000 = 247.5 shekels, and so on until the loan is paid off. It's a shame to recycle after paying most of the interestThis is a phrase bankers love to say to customers who come in asking if they should refinance their mortgage. Sometimes I have no choice but to be blunt. This phrase is total bullshit. Let’s say you took out a loan of 700,000 shekels and paid 4% interest on it for 10 years. You already understand that you’re "buying" your current debt every month at a rate of 4% (annual interest)/12 (months in a year). If I offer you a refinancing deal where you’d pay 21% per year instead of 41% starting now, does it matter how much you’ve already paid, or does it matter how much less you’ll pay from now on? Obviously, what matters is Only how much you can save in the future. The fact that you have paid X shekels to date has no economic significance.Wait, wait, but with a Spitzer, you pay more interest at the beginning and less interest out of the monthly payment later on. This is a correct statement but completely unrelated to the advisability of recycling. When the monthly payment is fixed, as in a non-graduated loan, the ratio between principal repayment and interest payment in the monthly installment shifts over the years. When the debt is high, the majority of the monthly payment is interest, and when the debt is lower, the majority of the monthly payment is principal. Still, if we refinance and reduce the annual interest rate while maintaining the same monthly payment amount, we will pay less money in terms of total payments to the bank.But my banker actually told me not to refinance because of the high penalty. Oh well, you know merchants, they always want you to pay a lot for their goods. I already described the refinancing penalty issue in the article about Mortgage Refinancing.And a final point, when assessing the feasibility of refinancing at the bank, the banker uses unrealistic assumptions: a zero inflation rate and interest rates that will always remain at their current level. Therefore, even for a loan with a hundred percent variable repayments, the banker will not say it's worthwhile to refinance because the loan is risky.So many biases in the banker's "advice." Perhaps he's not the right advisor for you.In summarya. Interest paid in the past has no meaning. It is always worthwhile to refinance in order to reduce future payments. b. The recycling examination should also address future changes in the prime rate, index, and long-term interest rates ( variable every 5 years as an example). C. A refinancing review must also address the risks of the current loan and not just whether it is being saved or not.
This week, the Treasury published two decisions that will allow you to save A lot Money.Both decisions concern promotions that were published in the past and unfortunately did not receive a public response despite their advantages:1. Eligibility mortgage refinancing campaignEligibility loans are loans that were granted in the past at an interest rate indexed to the CPI plus 3%-4% (depending on the year). These interest rates were low at the time, but today they are nearly double the market rate. The Ministry of Finance has instructed the banks to contact all customers and offer to refinance these loans into cheaper loans. Using one meeting at your branch. The fact that so few customers have taken advantage of this option is a subject for extensive social research, in my opinion.Bank of Israel has now announced that it is extending the validity of the operation by three months. If you have such a loan, please repay it. I'm sure you have better things to do with the money than pay it to the bank. Click here for more details about the offer2. Withdrawal of funds from pension funds without tax liability (up to NIS 7,000 from each fund) –Many of us have significant funds accumulated in provident funds, study funds, and various pension funds. In the past, every workplace would contribute to a fund chosen by the employer. In other words, the employer would select a fund based on the benefits offered. that he should be credited towards employee management fees. Additionally, there are parents who have deposited funds for their children in provident funds. In practice, there are individuals with funds scattered in various places without their knowledge. This is convenient for the study fund/provident fund because when the client is unaware of the funds they possess, they do not pay attention to management fees and do not withdraw these funds.The beginning of wisdom is for everyone to know All the places in which they may have money. For this purpose, the Treasury has opened a website through which it is possible to obtain a report containing a list of all entities holding money belonging to a specific person (identity number). Website address for locating funds: https://itur.mof.gov.il/After that lengthy introduction, let’s get down to business. For provident funds, the maximum management fees are approximately 11% per year. When there is little money in a fund under a specific saver’s name, these management fees do not cover the costs, according to the insurance companies that manage the provident funds.The Treasury took two steps:A. Approved a minimum monthly fee of 6 shekels for provident funds, instead of 11 shekels per year.b. Allow savers with less than 7,000 NIS to withdraw these funds in the next three months without paying taxes.You can look at it this way: if you have less than 7,000 shekels in your provident fund, that money won’t make it to retirement anyway. You can now choose whether to withdraw it and use it as you wish, or leave it in the provident fund and let the fund gradually erode it through monthly management fees until all your savings are depleted. Which do you prefer? It seems like an easy decision to make, but the Ministry of Finance was disappointed to discover that only 12% of these funds (300 million out of 2.5 billion shekels) had been withdrawn. Therefore, an extension was granted for making the withdrawals. Don't wait until the last minute. The foundations are not enthusiastic about releasing 2.5 billion shekels and do not make the process easy. What a shame! [table id=1 /] Optin Architect
When requesting a mortgage refinance, the bank first asks for a two-year mortgage activity report.This report is called slightly differently at each bank, which can be confusing. However, the essence of the report is to present all payment activity from the last two years. The bank wants to see approximately 24 equal payments. This means that the mortgage was paid regularly each month without payment issues. If there was any early repayment during these two years, that obviously does not pose a problem.The report looks like this (for one of my mortgages):