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How to borrow money to buy a House in Japan

Interest rate and several banks in Japan

If you can borrow money from major bank ( Toshi ginko like, Mitsubishi Tokyo UFJ bank, Mizuho Bank etc ), interest rate will be lower than other money lenders ( For example Suruga bank etc.)

There are some money lending companies that try to lend foreign nationals with high interest rate.

Some of foreign nationals do not have enough information about borrowing money in Japan.

And they try to abuse their lack of information.

If you can borrow money from Toshi Ginko, interest rate will be reasonable.

However, they are not positive about  lending money for investment.

( They are mostly prudent, conservative ).

Interest rate of real estate investment loan

Interest rate ( 金利 = Kinri = borrowing rate ) is about 2% to 7%.

In differs depending on borrower and lenders, existence of collateral, length of service etc.

If you can not borrow money below 4%, it is better for you not to borrow money to purchase a real estate.

Because, you will be suffered from negative cash from soon.

You can focus on your main job and prepare  enough cash.

Bank loan  and Negative cash flow  ➡

(As for Housing Loan Deduction based on the latest information as of February 2023, you can see this page.)

Floating rate ( 変動金利 = Hendou kinri ) and fixed rate ( 固定金利 = Kotei kinri ).

Authority changes floating rate every half a year.

However, even if floating rate is changed, the amount of your monthly repayment is not changed within 5 years.

( Assumed you loan 120 yen from bank with interest rate of 0% and repayment period is 1 year.  Your amount of monthly repayment is 10 yen. )

And at the time of change of repayment amount,  it can not be increased more than 25%.

So, assumed that your monthly repayment amount is 100 yen, even if floating interest rate is increased by 100%, your monthly repayment amount is not increased to 126 yen.

In the case of fixed interest rate, interest rate is not changed within your repayment period, for example for 25 years.

However, fixed interest rate is mostly higher than floating rate.

Assumed that current floating rate is 1 % and fixed interest rate is 2%.

If you think that floating rate will not increased to over 2% during your repayment period, you can select floating interest rate.

Criteria for examination ( Shinsa kijun = 審査基準 ) by bank.

In the case of loan to start real estate investment, interest rate should be higher than real estate for residence.

And examination by bank whether they shall lend money to you or not is severe.

In the case of housing loan, if you do not repay your loan, bank can evict you by taking process in court house and you will lost your place to sleep.

So, you will try to repay your loan by all means.

However, in the case you make a loan to purchase real estate for investment, an employee of bank think you do not have such strong motivation.

Loan from major  bank

In the case of Mitsubishi Tokyo UFJ bank, Mizuho bank, Mitsui sumitomo bank is negative in loan for real estate investment.

If you have consecutive dealing with specific bank and can borrow money from them, borrowing rate will be about 3%.

And you may need to prepare cash at least 30% of purchase price and it is difficult to apply for fixed interest rate.

Loan from Local bank ( Chiho ginko = Chigin = 地方銀行 )

Local bank ( Many of them have head office outside Tokyo prefecture ) is positive in real estate investment loan compared to Major bank.

However, they have specific business area.

For example, a bank has branch head office in Nagano prefecture, they are positive in lending money to purchase real estate in Nagano prefecture.

Money lending facility ( = Non bank ) other than bank

They are the most positive facility in lending money to purchase real estate for investment.

You may be able to borrow money with easier examination.

Interest rate will be from 2% to 6%.

Surely, interest rate should be higher than other money lending company.

You purchase a real estate in Tokyo with borrowing money from them, it is difficult to acquire positive cash flow.

Loan from Government financial institution ( Seifu kei kin yu kikan = 政府系金融機関 )

In the case you borrow money from Government financial institution ( A kind of bank their shares are owned by government, for example Nihon seisaku kin yu kouko ), interest rate will be less than 2% and you may be able to apply for fixed interest rate.

.There are possibilities that you can borrow money with lower interest rate compared to major bank.

However, repayment period is shorter than other bank, it will be at most 15 years.

So, monthly repayment amount should be increased.


Factors that effect condition in borrowing money from bank in Japan

Balance amount that you have already borrowed money from other bank.

Money lending company shares your financial information with other company.

In the case  you have loan from Bank A now, if you try to loan from Bank B, balance money for Bank A should effect condition of Bank B.

In general, when bank or money lending company lend money to you, they take your annual salary into consideration.

In the case of loan to purchase residence, you make loan of at maximum 7 time of your annual salary.

And in the case of loan to purchase a real estate for investment, it will be 5 times of your annual salary.

( Of course, it differs depending on situation )

Situation of your health

In the case you were hospitalized in past 3 years due to disease, you may not be able to make a loan.

Consumer credit card

If you have a bank card of consumer credit card ( shohisha kinyu card ), there is a possibility that you can not make a loan from bank.

In the case you have account with loan shark ( = Sara kin ), you may receive a kind of bank card.

If you have such card, it is one of symptom that you are suffering from lack of money.

If you borrow money from loan shark, interest rate will be around 15%.

Quality of your office

For bank and other money lending organization, where you are working is importance information.

Because, if your employer ceases to exist, you can not repay your debt.

So, you are working in listed company or major company, or have enough number of employees and capital amount, sale amount, history of operation, it should be advantage for you.

Duration of your service

If you have been working in same company for more than 3 years, it will improve your trust from bank.

Or if you have changed your office and amount of your salary has been increase, it will be good.

Condition of work contract

In general, part time worker, contract worker ( Koyo shain, dispatched worker ) can not make loan.

Amount of your annual salary ( Nenshu )

It is better that your annual salary amount is more than 5 million yen.

Ratio of repayment amount against your salary

Your annual repayment amount / your annual salary × 100 is less than 30% is important.

This is called Hensai futan ritsu ( 返済負担率 ).

Your age

In order to apply for real estate investment loan, you should be younger than 54 years old.

Because when salaried workers get old, they will be retired from their work.

Your own fund ( Jiko shikin = 自己資金 )

By preparing enough self financing fund, even if you do not satisfy other requirements, you may be able to make a loan from bank.

In general, you need to prepare at least 5% of trading price of the real estate.

Steps to make a loan from financial institution ( Kin yu kikan ).

① You can consult with employee of financial institution ( kin yu kikan ) and make application for making loan.

②  You prepare necessary documents.

Sales contract of real estate.

Map of neighborhood.

Certified copy of real estate register.

Recorded map ( kozu )

Certificate of assessed value of real estate.

( Tax office assess value of real estate and issue document that certifies value of real estate. )

Summary of the real estate.

Calculation sheet of cash flow.

Estimate of necessary expense to buy the real estate.
( You clarify expense for real estate broker, registration tax, acquisition tax, fee for lawyer. )

Drawing map of building.

Pictures of the real estate.

Withholding tax slip
( In this document, you can clarify amount of your salary )

③  Financial institution starts examination for lending you money.

④  Financial institution notifies you of decision of lending you money.

⑤  You can conclude lease contract, contract for establishment of mortgage, life insurance ( 団体信用生命保険 ).
⑥  Extension of loan and lawyer files registration of ownership transfer and establishment of mortgage.

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