KamaKama

November 8, 2026

Shpitzer or Fixed Principal? A Mortgage Comparison With Real Numbers

The difference between a Shpitzer (annuity) and a fixed-principal mortgage in Israel: how much interest fixed principal saves and what it costs in monthly payments. ₪1M over 30 years, plus a CPI-indexed track.

The short answer: with Shpitzer your monthly payment stays the same; with fixed principal (keren shava) it starts high and falls every month. On a ₪1,000,000 mortgage over 30 years at 4.6%, Shpitzer costs ₪5,126 a month for the whole term, while fixed principal starts at ₪6,611 and falls to ₪2,788. Fixed principal saves ₪153,603 in interest, but its first payment is ₪1,485 higher, and the same income lets you borrow less.

Neither one is "the right" schedule: the interest rate is the same, only the pace of repaying the principal differs. Below we show exactly what that means in money, who each one suits, and what changes on a CPI-indexed track. Every figure was computed with our mortgage calculator, where you can pick Shpitzer or fixed principal for each track separately.

What is the difference

In both schedules interest is calculated the same way: every month, on the principal still outstanding (explained in detail in how mortgage interest is calculated). The only difference is how much principal you repay each month:

  • Shpitzer: the monthly payment is fixed. At first most of it is interest and little is principal; over time the split reverses.
  • Fixed principal: you repay the same amount of principal every month — the loan divided by the number of months — plus that month's interest. Because the principal falls faster, so does the interest, and the payment keeps shrinking.

The comparison: ₪1,000,000 over 30 years at 4.6%

Assume a fixed, non-indexed track at 4.6% — close to the Bank of Israel's published average for that track in August 2026 (4.62%) — over 360 months.

Shpitzer:

  • Monthly payment: ₪5,126, from the first month to the last.
  • Total interest: ₪845,520. You repay ₪1,845,520 in total.

Fixed principal:

  • Principal repaid: 1,000,000 ÷ 360 = ₪2,778 every month, plus interest.
  • First payment: ₪6,611. After 5 years the payment is ₪5,972, after 10 years ₪5,333, after 20 years ₪4,056, and the last payment is ₪2,788.
  • Total interest: ₪691,917. You repay ₪1,691,917 in total.

Fixed principal saves ₪153,603 in interest. But over the first 5 years you pay ₪70,233 more than with Shpitzer, and only in month 141 — almost 12 years in — does the fixed-principal payment (₪5,120) first drop below the Shpitzer payment. By then you will have paid ₪104,247 more.

Why fixed principal is cheaper — and why it isn't a "discount"

It's tempting to see fixed principal as a cheaper product, but the rate is identical: 4.6% a year on what you owe. The difference is how much you owe over time.

  • Balance after 5 years: ₪912,952 with Shpitzer, ₪833,333 with fixed principal.
  • Balance after 10 years: ₪803,442 with Shpitzer, ₪666,667 with fixed principal.
  • Average balance over the whole term: ₪612,695 with Shpitzer vs ₪501,389 with fixed principal.

With fixed principal you simply borrow less money for less time, so you pay less interest. That is also why the right comparison isn't only "how much interest will I pay", but also what you would do with the payment difference in the early years.

The first payment decides how much you can borrow

Under Bank of Israel Directive 329, a bank may not issue a mortgage whose monthly payment exceeds 50% of regular income, and above 40% the loan counts as higher risk. With fixed principal the highest payment is the first one, so that is the one that has to fit:

  • To keep the payment at or below 40% of income, Shpitzer at ₪5,126 needs a monthly income of ₪12,816; fixed principal at ₪6,611 needs ₪16,528.
  • The other way round: if the most you can comfortably pay is ₪6,000 a month, Shpitzer lets you borrow ₪1,170,402 over 30 years, and fixed principal only ₪907,563.

So if your income is what limits the size of your mortgage, fixed principal on the whole amount is usually not a practical option. Work out how much you can borrow from your income with the mortgage affordability calculator.

What about a CPI-indexed track?

On an indexed track the balance is adjusted every month by the consumer price index, so the payment changes too. Take the same ₪1M over 30 years at 3.3% fixed, CPI-indexed (the Bank of Israel published a 3.29% average for August 2026), assuming 2% annual inflation:

  • Indexed Shpitzer: the payment starts at ₪4,387 and rises with the index for the whole term, to ₪7,976 in the last month. After 5 years the balance is still ₪987,782 — almost what you borrowed. Total paid: ₪2,161,513, of which ₪437,852 is indexation.
  • Indexed fixed principal: the payment starts at ₪5,537, rises slowly to ₪5,641 in month 124 and then falls, to ₪5,073 in the last month. After 5 years the balance is ₪920,899. Total paid: ₪1,984,071, of which ₪370,963 is indexation.

On an indexed track the gap is starker: with Shpitzer the balance barely falls in the early years, because indexation adds almost as much as the payment removes. With fixed principal the balance falls from the start, so the payment doesn't climb over the years. The figures depend, of course, on actual inflation, which nobody knows in advance.

So which should you choose?

Shpitzer usually suits you when income is what limits the mortgage size, when big expenses are coming in the next few years, or when you want a predictable payment to plan around. Fixed principal suits you when you can comfortably afford the first payment and want to pay less interest and cut the debt quickly — for example ahead of a sale or a mortgage refinance in a few years, when a lower balance works in your favour.

You don't have to choose one for the whole mortgage. The schedule is chosen per track, so you can, for example, take Shpitzer on most of the mortgage and fixed principal on one small track. Try a few combinations in the calculator and compare the first payment, the payment in 5 years and the total interest. Average rates for each track are on the Bank of Israel rates page.

Calculate it yourself

The figures in this guide are estimates for illustration and are not financial advice. The rate, payment and loan terms are set by your bank based on your details.