First home: build the budget before you sign
Before you fall for a flat, know which monthly repayment you are comfortable with and which costs come with the deal. That way the budget still holds after you get the keys.
By Lidor Levin3 min readPlanning the deal
Buying a first home usually starts with the price of the flat, but the more important decision is how much you can pay every month, for years, without it squeezing the rest of your life. A budget built before you sign helps you look at homes in the right range and avoids surprises once the deal is under way.
Start from the repayment, not the price
The first question is which monthly repayment is comfortable for you. To answer it, go through your regular income, your regular spending and your existing commitments, and leave room for the unplanned. The repayment a lender may approve and the repayment you are comfortable living with are not always the same number.
Your own funds and the costs around the deal
Your own funds do not all go towards the price. Some costs come with the deal, and it is worth writing them down in advance:
- Purchase tax, if it applies to the deal. The amount depends on the price and your circumstances, so find out early.
- Legal fees and registration costs.
- A valuation and the costs of opening the mortgage file.
- Insurance usually required alongside a mortgage, such as life and building insurance.
- Moving and setting up: removals, repairs, furniture and whatever the flat needs before you can live in it.
For illustration
Say a couple works out that a repayment of ₪6,000 a month still leaves room for savings and unexpected costs, while ₪7,500 already stretches the budget. Even if a higher repayment were possible, they can choose to look at homes that fit the comfortable one. The figures are for illustration only.
A safety margin
A budget that only holds when everything goes to plan is a tight budget. Keep a cushion for months when income drops or spending rises, and remember that on some tracks the repayment can change. How tracks react to change is covered in the article on the mortgage mix.
Before you sign
- Check which repayment is comfortable, not only how much you can borrow.
- List every cost around the deal, not only the price of the flat.
- Keep a safety cushion after your own funds have gone in.
- Start gathering documents early. The list is in the article on documents.
A final check before committing to a home
- Separate funds already available from a gift, sale or loan that still depends on a condition.
- Map the contract payment dates against the dates when each source of funds will actually become available.
- Keep a reserve for costs after moving in and for a weaker income month; approval in principle does not replace checks on the property and transaction.
Common questions
How much of my own money do I need for a first home?
There are rules on how much can be financed with a mortgage, and they depend on the type of deal and your circumstances. Find out what applies to you before you start looking, so you look in the right range.
Should I get approval in principle before I look?
Approval in principle gives a first picture of what is possible, but it is not a final commitment. Even with it, build the budget on what is comfortable for you, not only on what was approved.
General information only, not personal advice. Every figure here is for illustration.
Further reading
Want to look at this for your own case?
On the intro call we'll go through your income, spending and own funds together, and work out which repayment suits you before you start looking.
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