Can Crowd Funding Replace a Bank Mortgage?

Frustrated with the banks, a young couple is taking a novel approach to raising money: Recruiting donors via the web, promising to repay the 'loan' by giving to earmarked charities.

A young Israeli couple is raising the money to build their new home using crowdfunding, a method that until now was used mostly by politicians and celebrities.

On Thursday Linoy and Ohad Rotem registered their "Social Justice House" as a project on the Headstart website, which bills itself as "Israel's crowdfunding platform." Their goal is raise NIS 1 million.

Rather than taking out a mortgage that they say would barely cover construction costs and saddle them with high interest rates, the Rotems are offering to repay their debt by giving NIS 3,000 a month to charities chosen by their donors.

"Why should we waste the money on preposterous bank charges when we can give it to those who really need it?" they ask in their online appeal.

Linoy, 31, is a teacher, while Ohad, 32, is manager of a Haifa pet store. They purchased a building plot in the Galilee "community village" of Michmanim, where they hope to raise their children, Romi, 4, and Tom, 1. Their 150-square-meter dream home, modest by any standard, they say, will have four bedrooms.

The couple took out a mortgage on the property five years ago, from Bank Leumi.

"Instead of repaying a mortgage, the destitute and needy will receive the money," they stress. "We are giving back to the community. Rather than spending NIS 3,000 on monthly mortgage payments so that all kinds of tycoons can get more millions in annual bonuses we'll pay NIS 3,000 to those who need it most until we repay the entire amount received to build the house."

Those who contribute large amounts will be entitled to special beenits. A contributon with more than NIS 5,000 get a free dinner at the Rotem's aftetr they finish building their home. Those giving NIS 10,000 or more will get a weekend at the home, includng breakfast.

They add that taking out a mortgage is like paying for two houses, all essentially profit for the bank.

As of last night 88 donors had pledged NIS 65,200. Under Headstart rules the Rotems must reach their pledge goal within 40 days from today in order to receive the money.

According to headstart co-founder Yonatan Gal the couple's project recorded more than 10,000 hits in its first three days.

"The advantage is the social aspect, helping Israeli society," says Ohad, adding, "It's also something against the tycoons." He and Linoy are working their virtual and real-life social networks, including friends and relatives, to drum up donations.

"The idea is to do something different and produce the house differently, and not take money from one's parents or uncles," explains Gal, adding, "We want to carry out the project in its entirety, not give them just NIS 100,000 but to build the 'social house.' We believe in this and therefore don't provide partial funding."

The project is supervised by the Shtainmetz, Aminoach & Co. accounting firm, which has set up a trust account for the purpose and will monitor the transfers of funds to the nonprofit organizations selected by the donors.

The Rotems conclude their pitch on the headstart website ( ) with a vision for the future:

"Think about it for a moment. If each one of us helps someone else, won't our small country be an even more agreeable place in which to live? If great numbers of caring people help the vast number of those who wish to own a home, what will happen to the banks' profits?"

Avishag Shaar-Yashuv