Guide to Home Mortgage Loans in Japan

Loans for foreigners purchasing property

In recent years loan interest rates in Japan have remained low, and because of this many people who buy real estate consider using a loan to do so. While foreigners are able to purchase real estate in Japan, Japanese financial institutions are hesitant about giving loans to foreigners. In order to obtain a loan there are various prerequisites that have to be met, though they may vary depending on the institution.

We here at PLAZA HOMES would like to introduce financial institutions that offer mortgage loans to foreigners and provide support from the application for a loan to the loan agreement in accordance with your request and funding plan.

Overview of Housing Loans in Japan

The prerequisites for a housing loan vary according to each financial institution. The following are general prerequisites along with a summary of housing loans in Japan. A housing loan is usually applied for when buying (a house that you and your family plan to live in), renovating, or refinancing a home.

General Prerequisites for housing loans among Japanese finacial institutions

Prerequisites for Loan applicants

• Age

  Age at the time of loan application should be over 20years old to between 65-69 years old. Age at the time of completing payment of a loan should be around 75 – 80 years old.

• Years of continuous employment in Japan

  At least 2 to 3 years or more. *There are some exceptions.

• Yearly income

  Minimum yearly income should be between approx. JPY2,000,000–5,000,000.

• Those who eligible to take out Group credit life insurance
  (It may be voluntary in some institution)

Prerequisites for the Property

A building should be built in accordance with the Building Standard Act.
It should come with landownership.

Loan Amount

Up to JPY100,000,000 or JPY500,000,000

Generally loans will cover up to 70–80% of the purchased amount and up to 90% of the assessed value of home equity by a financial institution. The total amount of the loan to be repaid each year (Debt-to-income ratio) should be within a general range of about 25%–35% of one's yearly income.

Life of Loan

From 1–35 years

Loan interest

Various types of loan interest rates are available. There is floating rate interest, fixed rate interest for a certain period of time, and a fixed rate interest for the entire life of the loan type.

Example

• Floating rate loan:
  Based on the over-the-counter floating interest rate 2.475%.
  When the preferential interest is applied, it could be 0.5–1.0%.

• Fixed rate loan:
  1.2–2.0% (Flat 35).

Repayment Methods

There is the principal and equal interest system of repayment, capital equal system of repayment, and Bonus repayment.

Prepayment:
Small amount of prepayment by using the internet and automatic system for prepayment are available.
Handling fees vary depending on method used.

Guarantor and Guarantee Charge

Guarantee by the Credit Guarantee Company often becomes a prerequisite to a loan. In this case it costs a certain amount of guarantee charge, which is sometimes included in a loan interest. Some financial institutions don’t require both a guarantor and a guarantee charge.

Group credit life insurance Premiums

Group credit life insurance is required to be taken out. The insurance premiums are often included in a loan interest, or paid by a financial institution.

Handling Fee

It varies depending on the financial institution. An example estimate would be about JPY32,400–108,000.

When a Foreigner Applies for a Housing Loan

In order to minimize the risk of any delay in the repayment of a mortgage loan, Japanese financial institutes stress that a foreign applicant for a loan be non-migratory. As such, an applicant is usually required to be someone who has either Permanent Residency status, a Japanese spouse, or a residence period in Japan long enough to be eligible for applying for Permanent Residency status.

Many of Japan’s major banks (MUFG Bank, Ltd., Mizuho Bank Ltd., Sumitomo Mitsui Banking Corporation, and Resona Bank, Limited), trust banks, and local banks establish the following conditions as their prerequisites for loan applicants.

• Someone who has Permanent Residency status or who has a Japanese spouse.

• Someone who is employed in Japan and pays taxes (who can submit an Income certificate, a Tax certificate, a Withholding certificate, etc.)

• Someone who resides in Japan (one who registers their residency in Japan).

Financial Institutes Handling Housing Loans for Foreigners

There are some financial institutes within Japan that offer housing loans to married foreign couples or single individuals without Permanent Residency status. The prerequisites for a loan, such as the maxium loan amount, years of continuous employment, and yearly income, can very depending on the financial institue. Interest rates on loans may be higher and the LTV (Loan to Value Ratio: Ratio of loan amount against the appraised value of a real estate property) may be lower in these financial institutes than those offered in Japan’s major banks.

PRESTIA (SMBC Trust Bank Ltd.), Shinsei Bank, Limited, Suruga Bank Ltd., Bank of China, and Bank of Communications Limited handle housing loans exclusively for foreigners who reside in Japan and who have a stable income. 

• PRESTIA (SMBC Trust Bank Ltd.)

  No Permanent Residency status needed. No guarantor needed. A foreigner must be residing in Japan with their yearly income for the previous year being over JPY5,000,000. English-speaking assistance is available.

  https://www.smbctb.co.jp

• Shinsei Bank, Limited

  Only if an applicant has a spouse of Japanese nationality will Permanent residency status not be required. Otherwise permanent residency status is still required. A spouse will be required to be a guarantor. English-speaking assistance is available.

  http://www.shinseibank.com

• Suruga Bank Ltd.

  As a general rule, permanent residency status is required. Applicants without permanent residency can be consulted. Explanatory Booklet is available in English.

  (Japanese Site)

  https://www.surugabank.co.jp

• Bank of China

  As a general rule, services are only available to applicants with Chinese nationality who have residence Status in Japan. Limited Services are available to applicants without residence status in Japan. Japanese and Chinese speaking service is available.

  (Japanese Site)

  http://www.bankofchina.com

  (Chinese Site)

  http://www.bankofchina.com

• Bank of Communications Limited

  Services for a person with foreign nationality who has residence Status in Japan and a yearly income over JPY4,000,000. Japanese and Chinese speaking service is available.

  (Japanese Site)

  http://www.bankcomm.jp/JP

  (Chinese Site)

  http://www.bankcomm.jp/CN

Typical Cases & Procedures for Foreigners to Obtain a Loan

• - An applicant who has a stable income in Japan
• - An applicant who can provide decent amount of cash upfront * to purchase a residential property
• - The maximum life of the loan is between 25 and 35 years

* Normally it is required to have enough money to pay at least 10 to 28% of the purchase price.

This cash will be for:

1. Usually the down payment for the property will be around 10% of the price.
2. In general, financial institutions do not fund 100% of the price, so the buyer is expected to cover the remaining balance.
3. There are miscellaneous fees that make up around 6 - 8% of the sales price to be paid on top of the actual price.

This example is a generalization. Please be advised that the requirements and amounts to be paid may vary depending on your condition and the screening procedures of the financial institutions.

• Sales Price: ¥100,000,000
• Down payment: About 10% of the Sales Price
• Miscellaneous Costs: 8% of the Sales Price
• Loan Amount: 80% of the Sales Price

* Please see Examples of Property Buying Costs for a breakdown of miscellaneous costs.

It is necessary to check the following with a financial institution in advance when considering obtaining a housing loan:

• Requirements to obtain a housing loan and the required documents
• Loan Interest Rates (Fixed or floating)
• Life of the loan

It is common practice to include a special clause in the sales contract for the canceling of a contract in the event that an application for the financing of a loan is declined. With this special clause, the buyer will be able to cancel the sales contract without incurring any penalties within the designated term (excluding a stamp duty).

Investment Property Loans for Foreigners

When a non-resident in Japan purchases real estate property for investment, asset management, or for use as a second home, a housing loan cannot be used. For these purposes an investment property loan should be considered. The LTV* for an investment property loan is often lower than that of a housing loan.

*Loan to Value Ratio: Ratio of the loan amount against the appraised value of a real estate property

Resident in Japan: The cases eligible for real estate investment loans

- When purchasing real estate for the purpose of second home, investment, or asset management.

- When you have taken out a housing loan for your present home and purchase a second or subsequent property.

Financial Institutes handling Investment Property Loan for foreigners

• ​PRESTIA (SMBC Trust Bank Ltd.)​
  

  No Permanent Residency status is required. No guarantor needed. It is required that a foreign applicant reside in Japan and that their yearly income from the previous year be over JPY7,000,000. There are some prerequisite conditions for the property to be applicable for the loan (the type of property structure, building area, age, usage, etc.). English-speaking assistance is available.

  (English Site)

  https://www.smbctb.co.jp/en/

• ​Shinsei Investment & Finance Limited​
  

  No Permanent Residency status is required. It is required that a foreign applicant resides in Japan. English/Chinese-speaking service is available. Loan contract is made in Japanese. The eligible areas are Tokyo, Kanagawa, Chiba, and Saitama, which are close to central Tokyo and the suburbs.

  Toll-Free: 0120-463-881  English-speaking Customer Support: 03-6871-8040

  (Japanese Site)

  https://www.shinsei-if.com/real-estate/buyer/

• ​Bank of China​
  

  In general, their loan service is only available for applicants with Chinese nationality who have resident status in Japan. Limited service is available to applicants without resident status in Japan. Japanese-speaking and Chinese-speaking service is available.

  (English Site)

  https://www.bankofchina.com/en/index.html

  (Chinese Site)

  https://www.boc.cn/index.html

• ​Bank of Communications Limited​
  

  Services are for applicants of foreign nationality who have resident status in Japan and who’s yearly income from the previous year is over JPY5,000,000. Japanese-speaking and Chinese-speaking service is available.

  (Japanese Site)

  https://www.jp.bankcomm.com/

  (Chinese Site)

  https://www.jp.bankcomm.com/

• ​Industrial and Commercial Bank of China Linited

  Services are for applicants who have a residence address in Japan for at least 1 year and hold a passport of mainland China, Hong Kong, Taiwan or Singapore with a valid status of residence, etc.

  (Japanese Site)

  https://japan.icbc.com.cn/

  (Chinese Site)

  https://japan.icbc.com.cn/