How to Build the Right Mortgage Structure
A "mix" is simply the way you divide the mortgage amount between different tracks. Each track behaves differently - and that's exactly the point: the combination is what spreads the risk.
The three axes to understand
Each track differs in three things:
- The interest - fixed or variable
- The linkage - index-linked or not
- The period - how many years
The main tracks
- Fixed unlinked - the most stable, the most expensive. The payment never moves.
- Fixed linked - a lower rate, but the principal grows with the index.
- Variable every 5 years - a lower rate, updated at known points in time.
- Prime - moves with the Bank of Israel rate. Flexible, can be repaid with no penalty.
How do you decide?
The first question isn't "what's cheapest" but "how much risk can I absorb". Someone with very stable income and a safety cushion can take more variable tracks. Someone whose monthly payment is on the edge - needs more stability.
The second question: how long do you plan to stay? If you foresee a sale or refinance within five years, a track with a high repayment penalty is a problem.
A common mistake
Many people take the mix the bank offered as the default. The bank builds a mix that's convenient for it. That doesn't mean it's bad - it means it wasn't built around you.
What to do
Build two or three scenarios, check what happens to each if the rate rises by 1%, and compare the total cost. That's exactly the work an advisor does - with tools that compute it in minutes.