How Expatriate Residents Can Obtain A Real Estate Investment Loan

Watch the accompanying video Did you know that Expat Residents can obtain a Real Estate Investment Loan?

For further information on Tokyo real estate investment opportunities and to speak with one of our specialists, please complete the below enquiry form.

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

Well, as a general rule, 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.

Can You Provide Information On The Types Of Loans Available?

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.

Can You Provide An 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.

What Are The General Costs Involved in Buying Real Estate?

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.

What Are The Ongoing 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

Have There Been Any Changes to the Bank Loan Assessment Process As A Result Of COVID? 

Yes, rather than having to visit the banks for an assessment on the investment loan application, this can now be done via a video call.

Are There Any Other Considerations Our Clients Should Be Made 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.

Thank you for your time. I look forward to welcoming you to Housing Japan.

Bryan Kipping – Head of Investment Sales

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For further information on Tokyo real estate investment opportunities and to speak with one of our specialists, please complete the below enquiry form.