The following is a guide to the various options available for foreigners wishing to finance their real estate purchase in Japan.
Before you begin your property search, it is strongly recommended that you first find a bank that is able to finance your purchase at terms you are happy with. Be prepared to have at least 20 ~ 30% in cash (and extra to cover taxes and fees) as banks typically lend 70 ~ 80% of the value of the property (which can sometimes be lower than the purchase price).
You will also need to find out the following from your bank:
- How much can I borrow?
- How much downpayment is required?
- What interest rate can I borrow at?
- How much will my monthly mortgage repayments be?
- What are the upfront costs?
- What documents do I need to prepare for the application? (eg. medical exam, registering a personal seal, tax certificates)
- What type of properties will the bank lend on and what properties will they refuse to lend on?
Once you know the answers to the above, you can begin your property search.
Foreign residents of Japan with Permanent Residency
Japanese mega banks may be able to provide finance at competitive rates, although you may need to look around to find a branch that is comfortable dealing with foreigners.
- Income tax statements showing a stable source of income in Japan. You will also be required to have 1 ~ 3 years of continuous employment at the same company.
- Banks may require that the borrower has the ability to understand Japanese-language documents.
Foreign residents of Japan without Permanent Residency
If you have a Japanese spouse or spouse with permanent residency, live in Japan, have worked for several years in Japan at the same company and some fluency in Japanese, you may also be able to apply at most Japanese mega banks. As above, you may need to shop around.
If you do not have a Japanese spouse or spouse with permanent residency, but live in Japan and have worked for several years in Japan at the same company, you may also try SMBC Trust Bank Prestia for a home mortgage or investment property loan. Rates and conditions may vary so please contact a Prestia branch to find out more. Loan amounts may exceed 100 million Yen, depending on the borrower’s income.
If you speak Japanese at a level where you can understand complex loan documents (or have a spouse or legal advisor who can assist), Tokyo Star Bank may also offer home loans to foreign residents without permanent residency. Loan amounts will depend on the borrower’s income but max out at 100 million Yen. The bank charges a loan administration fee of 2.16% of the loan amount at the time of borrowing. Loans are not possible for investment properties.
For non-residents (eg. anyone currently living and working overseas)
There are very limited options for offshore buyers who want to borrow from a bank in Japan. You may be able to borrow from a bank in your own country, but please be aware that difficulties in pre-approval and differences in loan approval times and valuations may result in private sellers rejecting offers from buyers who require offshore financing. You may also face some difficulty selling the property in the future if it has a lien from an offshore bank.
Important points to remember:
- Not all borrowers are able to borrow at a bank’s prime rates. Depending on your personal financial situation, you might not be eligible for the low interest rates advertised in the branch’s window.
- If you plan to borrow over 100 million Yen from a Japanese bank, the approval process becomes more intensive. In some cases banks will only lend up to 100 million Yen at prime rates, and the additional loan amount may attract different interest rates. Some banks may simply refuse to lend over 100 million Yen.
- Ask your bank about their policies for borrowers who move out of Japan during the term of the loan.
- Make sure your bank is able to offer pre-approval. Sellers will not accept any offers without pre-approval and it is not advisable to sign a contract of sale without loan pre-approval.
- Find out the fees and taxes that your bank charges when taking out a mortgage. You should also consider the cost of necessary life insurance premiums when calculating your final budget.
- The loan-to-value ratio will be based on the bank’s assessed value of the property. Be aware that this amount could possibly be lower than the purchase price of the property and you may need to provide additional cash to cover the difference.
The information above is subject to change. Japan Property Central K.K. cannot guarantee that the above details will be available to every borrower. Actual loan amounts and conditions are up to the financial institution and may differ depending on the borrower’s personal circumstances.