Will the bank give you thousands of shekels, and you won't take them?

A significant portion of you can actually receive a gift from the bank, a check for NIS 10,000-15,000 or even more, without any problem. If you took out a mortgage with a high financing percentage and used EMI insurance for it, continue reading.

What is EMI insurance?

EMI is an insurance company that provided mortgage repayment insurance. In other words, high-risk borrowers—whom the bank feared would be unable to repay their mortgages—were referred to EMI to purchase repayment insurance. This company essentially promised, in exchange for a fee, to pay the mortgage to the bank on behalf of the borrower if the borrower stopped making payments for any reason. In practice, the bank referred anyone who requested a mortgage exceeding 75% of the value of the purchased apartment to obtain EMI insurance. In 2013, the Bank of Israel prohibited the granting of mortgages exceeding 75% of the property’s value, so the use of EMI insurance was discontinued. This company has effectively stopped providing services to new customers and is active only to serve existing customers.

The EMI insurance premium was set at approximately 41% of the mortgage amount and was paid to the insurance company In cash When taking out a mortgage. The mortgage bank spreads this payment over the entire loan term. For example, an apartment worth one million shekels purchased with 90% financing—meaning a 900,000-shekel mortgage—required EMI insurance at a cost of 4%*900,000 = 36,000 shekels. The customer does not notice this large sum because it is spread out and included in the monthly mortgage payments.

How do I get my EMI money back from the bank?

As stated, the bank has purchased insurance for you for the entire duration of the mortgage, but paid for it upfront in cash. Clients who needed EMI insurance purchased their apartments three or more years ago (in the last two years, as mentioned, there has been no more use of EMI). During these years, there was a sharp increase in apartment values on one hand, and on the other hand, if the mortgage taken by the client was reasonable, its balance decreased over the payment years.

Consequently, a very high percentage of borrowers who used an EMI when purchasing their home no longer need it, since their remaining mortgage balance is less than 75% of the apartment’s value.

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Thus, someone who bought an EMI insurance policy for NIS 36,000 five years ago can get a high percentage of the money back due to the increase in their apartment's value. All that needs to be done is to approach the bank and request a renewed appraisal that will prove the current value of the apartment and then demand cancellation of the EMI and a refund for the upcoming years of the mortgage that were paid in advance.

Why didn't anyone tell me about this? How am I supposed to know I'm owed money from the bank?

It is convenient for a bank to have borrowers whose entire mortgage is insured, and it will not have to take collection measures against them. A saving of NIS 30,000 for each family by canceling insurance? That is the family's concern, not the bank's. Moreover, a customer with an old mortgage who starts to take too much interest in it could, God forbid, notice that they are sometimes paying interest three times the market rate, and that would be real damage to the bank.

In general, the bank benefits from its customers' ignorance, and it makes no effort beyond what is legally required to reduce its customers' ignorance. Financial literacy is the responsibility of the citizens, and to that end, among other things, this website was established, and many other websites exist.