If you’ve been looking for a new apartment<\/a> recently, you’ve surely come across tempting offers: “Pay only 20% at signing, and pay the balance (80%) only when the building is ready in 3 years. No interest and no indexation!” On paper, it sounds like a dream. In reality, as with any financial transaction, there are no free gifts. At RS Nadlan, we’ve analyzed this model in depth for you, so that you understand exactly what you’re signing.<\/p>\n Because of the high interest rates in the economy, contractors realized that it’s hard for buyers to take out a large mortgage today. Their solution is to become a kind of “bank.” They let you postpone the big payment, and sometimes they subsidize the interest on the money themselves (a “contractor loan”). The contractor’s goal is to sell apartments quickly and generate cash flow, even if it costs them in financing.<\/p>\n Is my money protected in a deal like this? Should I take the deal even if I have all the money? 20\/80 deals are an excellent tool, but you need to know how to use it. Don’t be dazzled by the low initial payment: look at the final price and at your repayment ability. Here at RS Nadlan, a real estate agency in North Tel Aviv<\/a>, we know how to analyze the “fine print” in contractor contracts and tell you whether the deal really pays off, or whether it’s an expensive gimmick.<\/p>\n [Errors and omissions excepted: This information does not constitute financial or legal advice. Every deal with a contractor requires individual review and legal support.]<\/p>\n\n How Does the Mechanism Work? (And Why Do Contractors Do It?)<\/h3>\n
The Big Advantages for Buyers<\/h3>\n
\n
What’s the Catch? The Risks You Must Know<\/h3>\n
\n
Questions and Answers (FAQ)<\/h3>\n
<\/strong> Absolutely yes, as long as it’s a project with closed bank supervision under the Sale (Apartments) Law. The money you pay goes into a trust account (via a payment voucher), and the bank guarantees it. Don’t pay a single shekel directly to the contractor “under the table.”<\/p>\n
<\/strong> Excellent question. If you have the money in liquid form, and it’s sitting in the bank earning nice interest, it may pay for you to pay only 20% to the contractor and keep earning a return on the rest of your money. On the other hand, paying the contractor early can sometimes get you a significant discount (a “cash discount”). You need to do a simple mathematical calculation and compare.<\/p>\nThe Bottom Line<\/h3>\n