How Expats Can Obtain Real Estate Investment Loan In Japan

Did You Know Expat Residents Can Also Obtain A Real Estate Investment Loan?

As a general rule in Japan, if you have Permanent Resident status, stable employment over the past 3 years and annualized compensation in excess of JPY 7 million, you will be eligible for an investment loan.

Loan Options For Foreigners

Most banks will offer a floating interest rate loan, with fixed interest rate periods as an option. Such fixed periods will be no longer than 10 years. Please note that interest rates offered to individuals for their Home Loan mortgages will not be the same rates offered on real estate investment loans. The differential of rates at some banks can be as high as 100 bps.

The two-tier approach to lending is not unique to Japan, it’s simply how the banks assess the risk profile on investment loans.

Indication Of Loan-to-Value And The Maximum Term

Banks should be able to accommodate a loan-to-value ratio of up to 80%. To note, some banks calculate the loan-to-value based upon the bank’s assessed value of the property, which is not the same as the purchase price; the individual may be required to “make up the difference” between the assessed value and purchase price. The maximum term period of the investment loan will be 35 years with the last payment before the individual’s 80^th birthday, otherwise the loan term will be scaled down.

General Costs Involved in Buying Real Estate in Japan

1. Banks will normally charge a handling fee: 0.5% – 1%.
2. Documentary Stamp Tax: JPY15,000 – JPY60,000
3. Brokerage Commission: 3% + JPY 60,000 + Consumption Tax.
4. Legal and Registration License Fees: these fees are variable and are for mortgage registration, ownership transfer & time spent.
5. There is also a requirement for Fire Insurance Policy on the Investment Property; fees will be dependent upon the provider. 
6. Acquisition Tax: This is tax on purchased property, these fees can be charged up to 6 months after purchase completion.

You should expect to pay approximately 6% of the purchase price in fees.

On Going Costs

It is worth noting that there will be ongoing costs after you have purchased the investment unit, these costs can include: 

• Annual Property and City Planning Tax
• Building Maintenance and Repair Fees
• Property Management Fees

Other Considerations To Be Aware Of?

Banks will have a preference to provide loans on buildings not older than 20 years old.

Banks also have a preferred location matrix. Such preferred locations include Tokyo’s 23 wards as well as other major cities, e.g. Yokohama, Nagoya, Kyoto, Osaka, Kobe, Fukuoka and Sapporo. If you are planning to seek an investment loan outside of these areas, be prepared for a lower loan-to-value.

Lastly, banks will offer group life insurance on investment loans. If the policy is optional, my suggestion is that you agree to the life insurance policy. In the event of death, the insurance payout will clear the outstanding mortgage obligation in full.

At Housing Japan we do have relationships with Banks that provide investment loans and can make an introduction accordingly. With interest rates currently at historic low levels, there is never a better time to consider investing in real estate.

Discover our user-friendly Yen Loan Calculator tailored for purchasing homes in Japan

Our calculator is designed to assist you in accurately estimating your monthly mortgage repayments, whether you’re a first-time homebuyer or an experienced investor. This tool streamlines the financial planning process.

All you need to do is input the loan amount you plan to borrow, choose your preferred loan repayment period, and estimate the interest rate. Access the calculator here.

What Next?

At Housing Japan, we specialise in buying, selling, and managing residential luxury real estate in central Tokyo. Whether you are a local resident or simply seeking a second home or temporary residence for business trips, we have you covered. Our one-stop service includes expert management services, so you can sit back and relax knowing that everything is taken care of. Whether you are looking for a luxurious living experience or an investment opportunity, we are here to help you every step of the way. Reach out to us today for more information or to explore properties in this area. Our dedicated agents are ready to provide expert advice, tailoring solutions to match your unique goals and preferences. Browse through our collection of investment property listings from here.