Saving for a Home Can Take Decades

Couple with average income would need 24 years to make down payment.

One of the biggest obstacles to acquiring the home of your dream is coming up with the equity, which generally equals 30% to 40% of the buying price. Without help from parents, as everyone knows, it is nearly an impossible task. But what if a young couple wants to finance their own home by putting away a certain amount of savings every month?

New research from Migdal Capital Markets done by Hadar Etzioni tries to answer that question by calculating how many months putting aside into savings it would require to accumulate enough cash to buy a home. The estimate assumes the couple is looking to buy a home in the center of the country.

The answer Etzioni got: It is almost impossible.

Take a couple each of whom earns a monthly pre-tax salary of NIS 9,000 - close to the national average - and chooses to save 10% of their net pay. That would mean putting away about NIS 1,500 a month. To save enough to put down 30% of a home that will cost them NIS 1.5 million, they would have to save for 295 months, or 24 1/2 years.

If they want to budget NIS 2 million for their perspective home, the time balloons to an impossible 33 years, or 394 monthly salaries.

If they opt to save 20% of their take home pay, or NIS 3,000 a month, it will take them half that time, a reasonable 148 months or 12 1/2 years.

Even those earning high salaries will have to wait for the moving date, according to Etzioni's research. A couple, say a husband and wife in high- tech, earning a combined NIS 40,000 a month who opts to put aside a fifth of their monthly take home pay, or NIS 5,500, will have to wait 81 months, or 6 3/4 years for accumulate a 30% down payment on a NIS 1.5 million home. A NIS 2 million home under the same savings plan would take nine years.

Bear in mind, buying a home with just 40% will cost the buyer a lot in future mortgage payments. If a young couple wants to buy a NIS 1.5 million home with 60% of the price financed by the bank, it will cost them NIS 600,000 in interest over the life of the loan.

Assuming the couple earns average salaries, that would mean setting aside 10% of their net earnings for 394 months, or 33 years.