Mortgage Types — Complete Guide

Comprehensive guide to all mortgage types in Israel: repayment methods (Spitzer, equal principal, bullet, grace) and interest types (Prime, fixed, CPI-linked, variable). Comparison, pros and cons.

## Understanding Mortgage Types in Israel

Taking a mortgage in Israel is unlike almost anywhere else in the world. Instead of choosing a single loan product, Israeli borrowers build a mortgage from multiple tracks (maslulim), each with its own repayment method and interest type. Understanding the full landscape of available options is the first step toward structuring a loan that fits your financial profile and risk tolerance.

The Two Categories: Repayment Methods and Interest Types

Mortgage tracks in Israel fall into two broad categories. The first is the repayment method — how you pay back the principal and interest over time. The main options are Spitzer (fixed monthly payment), Equal Principal (Keren Shava, decreasing payments), Bullet or Balloon (interest-only with lump-sum repayment), and Grace periods (temporary interest-only before converting to regular payments).

The second category is the interest type — how the rate is determined and whether the loan is linked to inflation. Options include Prime-based variable rate, Fixed Unlinked (Kavua Lo Tzmuda), CPI-Linked (Tzmudat Madad), and Variable rate that resets every 5 years (Mishtana).

How Tracks Combine in an Israeli Mortgage

A typical Israeli mortgage consists of three to five separate tracks, each covering a portion of the total loan amount. For example, a 1.2 million NIS mortgage might be split into 400,000 NIS on Prime, 400,000 NIS on Fixed Unlinked, and 400,000 NIS on CPI-Linked — all repaid using the Spitzer method. This structure diversifies your risk across different interest environments.

The One-Third Rule

A widely recommended guideline among Israeli mortgage advisors is the one-third rule: allocate roughly one-third of your mortgage to Prime (for flexibility and no early repayment fees), one-third to Fixed Unlinked (for certainty), and one-third to CPI-Linked or Variable 5-year (for a lower starting rate). While not a strict formula, this balanced approach protects you against most economic scenarios.

Bank of Israel Regulations

The Bank of Israel imposes regulations on mortgage composition. No single interest type can exceed two-thirds of the total mortgage. Variable-rate tracks (including Prime) are capped at one-third of the total loan. These rules are designed to protect borrowers from excessive exposure to interest rate volatility and ensure a minimum level of stability in monthly payments.

Tips for Building a Balanced Mortgage Mix

Start by understanding your risk tolerance and financial horizon. If you plan to sell or refinance within 5-10 years, prioritize Prime for its penalty-free early repayment. If you want long-term certainty, lean toward Fixed Unlinked. In low-inflation environments, CPI-Linked offers attractive rates. Always compare offers from at least three banks, as the spread between the best and worst offers can save you tens of thousands of shekels over the life of the loan.

Working with a Mortgage Advisor

Given the complexity of Israeli mortgages, many borrowers benefit from working with a licensed mortgage advisor (Yoetz Mashkantaot). A good advisor will analyze your income, savings, and goals, then recommend a track mix and negotiate with banks on your behalf. Advisor fees typically range from 3,000 to 8,000 NIS — an investment that often pays for itself many times over through better loan terms.