Buying an apartment "off plan" differs from buying a second-hand apartment in a few important ways: the payments are spread over the construction period, the price is linked to an index, and your money needs protection.
The payment schedule
The contract with the contractor sets payment dates according to construction stages. The mortgage is drawn accordingly, not all at once. It is worth coordinating the drawdown structure with the bank in advance.
The construction inputs index
Payments to the contractor are usually linked to the construction inputs index (מדד תשומות הבנייה), which reflects construction costs. The law limits the extent of linkage, but it is still a risk: a rise in the index makes the apartment more expensive. Read exactly which payments in the contract are linked and from which base index.
The Sale Law guarantee
For every payment to the contractor you should receive a bank guarantee (or another security recognized by law) that protects you if the project is not completed. Do not pay without a guarantee.
A mortgage during construction
- Sometimes there is a grace period – you pay only interest until handover.
- The rate is usually set at the time of drawdown, not at the time of approval.
- You also need to budget rent until you move in.
Contractor deals
Deals such as 80/20 sound great, but sometimes the financing is "built into" the price. Contractor financing deals