While it may have been difficult for a foreign resident to obtain a home loan in Japan a few years ago, nowadays there are many options available for foreigners to obtain financing on a house or apartment purchase in Tokyo. This includes for both buying your own home or primary residents in Tokyo as well as leveraging bank financing for making an investment purchase. Previously, amongst other stringent requirements, one of the demands by Japanese banks was that a foreign buyer held permanent residency status, however this is also now changing. The below is a general summary, for more specific information it is best to contact us directly as the situation is fluid and there maybe new, up-to-date options of which a foreign buyer could take advantage.
One last thing to know upfront is that wherever you end up applying for a loan, all the documentation will be in Japanese. Housing Japan agents, as part of their service to you can arrange for English speaking bank assistance and translations of all documents, however the legally binding copies you will be signing will be in Japanese.
For a Japanese Bank:
- The applicant must hold permanent residency or be married to a Japanese National*
- Full-time employee (not a contracted employee)
- At least 3 years working in Japan, ideally for the same company, or 3 years self-employed in Japan
- Property must be used as your primary residence.
For a Foreign Bank:
- Full-time employee
- 3 years work history (they may consider your work history overseas)
- Property may or may not be used as primary residence (please inquire with bank)
The following factors will make your application more difficult:
- Less than 1 year at current job
- Contract worker
- Other outstanding loans
*These requirements are general bank rules, but in some cases they may be waived. Other factors may be considered, for example, if the applicant works for a large Japanese company, has lived in Japan for many years, has plans to / or has applied for permanent residency and is awaiting the result, has a significant savings or income to loan ratio, and so on. Fulfilling these requirements is not a guarantee of obtaining finance.
Can I obtain finance if I live outside of Japan?
When it comes to non-Japanese financing for the purchasing of Tokyo property, Housing Japan is able to assist in some cases for buyers coming from Hong kong or Singapore. Contact us directly to find out more information.
What are the necessary documents?
- The documents required may vary between banks, but the following documents are usually required:
For salaried employees: Tax Income Certificates (Gensenchoshu-hyō) / Final Income Tax Returns (Kakutei-shinkokusho) for the past 3 yrs
- For the self-employed: Final Income Tax Returns (Kakutei-shinkokusho) for the past 3yrs
When should I apply for a loan?
You should apply for finance with your bank as soon as you have found a property and settled on a purchase price with the owner.
It is a good idea to speak with or meet with several banks prior to your property search in order to find out whether you are eligible to apply, what documents are required and the general loan amount you may be able to obtain.
The pre-loan approval process takes between 5~7 business days and should be completed prior to signing the purchase contract. After the purchase contract is signed, the bank will begin the actual loan approval process which can take between 5~10 working days. A property contract will have a deadline for finance approval. If you do not obtain finance, you can cancel the purchase within the deadline and receive your deposit back in full.
What are the interest rates?
Floating rates for local banks are currently around 1.2% pa (June, 2010), while fixed rates will vary depending on the bank and fixed rate term. The foreign banks have a floating rate of about 2.16% pa (June, 2010) and do not have fixed rates.
How much can I borrow?
Generally, the loan amount is around 5~6 times your annual yearly income, but may be more or less depending on the bank and your financial situation.
- For loans under 100 million Yen, banks may lend anywhere between 80~100% of their assessed value of the property.
- For loans over 100 million Yen, Japanese megabanks and foreign banks in Japan will only loan up to 80% of their assessed value of the property.
- One exception is Suruga Bank who may be able to offer higher loan amounts, but at higher interest rates.
Note: Japanese banks will only consider assets and income earned within Japan in their calculations. However, foreign banks may be able to consider overseas assets and sources of income.
What are my repayments?
The following is an example of the typical monthly mortgage repayments for a 30 year mortgage with a floating interest rate of 1.10% and equal principal and interest repayments:
- ¥50,000,000 Loan = ¥163,000 /Month
- ¥75,000,000 Loan = ¥245,000 /Month
- ¥100,000,000 Loan = ¥326,000 /Month
- ¥150,000,000 Loan = ¥490,000/Month
*The above is a guide only. Actual repayments will vary.
Can I borrow to purchase an investment property?
If you have permanent residency or are married to a Japanese National most local banks will lend investment loans, depending on their own lending criteria and the type and status of the property top be purchased.
For a private mortgage, you must register the property as your primary residence, so all correspondence from the bank will be sent to this address. If you have to move out of your house or apartment and wish to rent the property out, you are obliged inform your bank in writing.
To find out more and try our yen mortgage calculator.
7F BPR Place Kamiyacho, 1-11-9 Azabudai, Minato-ku Tokyo Japan 106-0041+81 (0) 3-3588-8860