Our dear Expat friends!
In the past, we have received a lot of questions related to Japan mortgage loan applications. It is an essential part of the property purchase as many applicants prefer to finance their purchase by borrowing money from banks. However, they can be misguided or even get rejected by some banks only because they applied for the wrong bank. Therefore, it is reasonable that applicants want to know whether they are eligible for the Japan mortgage loan.
We have experience working with foreign nationalities in Japan and we provide real estate consulting services. It would be our pleasure to guide you through the process of Japan mortgage loan application, suggesting the best solution depending on your profile. This article contains the essential information you should know before starting the Japan mortgage loan application. You should not underestimate your chances for a mortgage loan as well as not get too overwhelmed. For this purpose, we thought it would be good to have the most frequently asked questions about Japan mortgage loan application gathered in one place and published as an article.
1. Can I get a loan if I do not have a PR?
It is a common misconception that if a person does not have a PR in Japan, then he/she is not eligible for the Japan mortgage loan. Yes, having a PR will give you advantages same as a Japanese national. However, it does not mean that if you have working or another type of visa, you do not stand a chance. Currently, several banks provide foreign nationalities that do not hold a PR with a mortgage loan.
2. Am I eligible for Japan mortgage loan if my wife/husband is Japanese national? Can he/she be the primary applicant?
Having a Japanese spouse is not a “golden ticket” for a Japan mortgage loan. If you are married to a Japanese nationality, and he/she has worked for several years and have a stable income, then this person can be the primary applicant. In this case, you can get all the advantages that only PR holders and citizens would typically get – low-interest rate and loan for 100% of the property value. However, in case if your spouse does not work, unfortunately even being a Japanese nationality will not help because a person without a stable income cannot apply for the Japan mortgage loan.
3. Can I combine my spouse’s income as well?
If the primary applicant is a Japanese nationality, the spouse must have a Permanent Residency to combine their income. If the primary applicant is a PR holder, then his/her spouse must be a PR holder as well to combine their income. If none of the family members have a PR, then they also can combine their income. However, in case you have a PR, and your spouse does not then you can apply with combined income. Therefore, if one member has a PR and the other is not you, unfortunately, cannot combine your income. Therefore, sometimes not having a PR might also be an advantage.
4. What if due to sudden health issues I can not repay the loan? Will the bank take away my property?
When applying for Japan mortgage loan, banks usually require applicants to apply for a Life Insurance as well. In case if the applicant is not able to service the loan due to serious health issues, then the Life Insurance may cover the costs. It is better to check with your insurance company which illnesses do they cover.
5. How much money can I borrow?
People are curious about the loan amount they can get from the bank. Indeed, this information is essential for the applicant as we want to know what house we can afford and how much down payment will be necessary. Unfortunately, banks have a complicated calculation method of deciding how much can the applicant get, thus it is necessary to inquire on a case by case basis. Of course, it is possible to calculate the approximate amount of Japan mortgage loan, but the actual number might differ.
6. How do banks decide the loan amount? What are my chances?
If you have worked in Japan for several years, have a stable income, clear tax record and credit history without violations, it is likely that you will get a loan. It is the information that banks check when you apply for Japan mortgage loan.
7. Can I get a loan even if I had credit problems in the past?
Yes, it is possible to get a Japan mortgage loan even if you had problems with credit card previously. But, of course, only if you have solved these problems before the Japan mortgage loan application. Banks will review your profile and pay attention to the employer company, income level, how many years you have been in Japan, credit history, and some other facts. Therefore, it is better to be cautious when submitting application documents. If you are not sure about the credit card history, you can check it yourself by inquiring information from credit companies. It would be beneficial to review it before sending the application form to the bank. If there is any critical problem, you might want to solve it first.
8. Which banks work with non-PR applicants?
Your application might get rejected by large banks because they have their reasons to decline. Please do not get frustrated because there are banks who provide loan for non-PR nationalities and you just went with the wrong one. Currently, banks like Suumo&Suruga, SMBC Prestia lend to foreign nationalities without a PR at a slightly high-interest rate and even up to 100% of the property amount. In this case, you must come up only with a 7% transaction expenses for the successful Japan mortgage loan application.
9. Is it better to wait until I get a PR and only then apply for Japan mortgage loan?
Of course, having a PR is an advantage because then banks will treat you same as a Japanese nationality. It means that you can get approximately 1% Interest Rate for fix term loan and around 0.7-0.8% for variable rate loan, coverage for 100% of the property value and even provision of the additional 7% transaction expenses. Without the PR the interest rate will be higher (appx. 3-4%) but the bank might also cover up to 100% of the property price. Therefore, even in this case, you will need to come up only with the 7% transaction fee. It means that in both cases you need to have savings to cover the initial costs for Japan mortgage loan.
Thus, it does not mean that it is always better to wait until getting a PR and then apply for Japan mortgage loan. Some people did not have a PR at the moment of application, and they did not lose the chance of getting the same loan terms as a PR holder. And the following question is a solution for this type of situation.
10. Will the interest rate change if I get a PR?
Imagine a situation like this:
You are paying a rental fee every month, even spending money on contract renewal maybe. Instead, you can pay towards owning a house, even if you do not have a PR. You might want to calculate it cost-effective to continue to pay the rental fee while waiting months or even years for Permanent Residency. If you are unsure and new to the Japan mortgage loan application process, it might take you a couple of years to get the cherished document.
While servicing the loan, you can put all your effort into the PR application. The fact is that banks usually require applicants to stay with them only first five years. Therefore, if you were granted a PR, after five years, you can apply for another bank with better terms like 1% interest rate and 100% loan amount.
11. How long can the Japan mortgage loan duration be?
It depends on the applicant’s age and the bank’s terms. For example, some banks assume that a person is likely to have a stable income and thus be able to service the loan until he/she turns 70 years old. Therefore, they would take your current age and subtract this number from 70. The result they get will be the duration of the loan.
12. Can I still keep the house even if I return to my home country?
We also get this question a lot from our foreign clients. Indeed, we understand their concern because anybody would like to know how they can handle a situation like this. What options does a person have when leaving the country while still paying out the loan. In such a case, we can suggest the following solution:
You purchased a house and currently servicing the loan, and suddenly you have decided/forced by some personal reasons to move to another country. We would introduce the client to our Property Management team who will take care of the property. They will find tenants and use the rental income to service the loan. Thus, the client would not need to be worried about the house or sell it away while being overseas.
13. Can I get a mortgage loan if I do not speak the Japanese language at all?
Before signing other documents, you need to familiarise yourself with an explanatory text which states all the terms and conditions of the bank. The bank’s representative must explain to you the whole document and assure that you accept the terms and conditions. Banks must be sure that you comprehend and make an informative decision. Therefore, they want to see an applicant who has at least a conversational level of Japanese.
If you do not speak Japanese fluently, we can suggest you hire a bilingual lawyer, who can ensure the bank of your full comprehension. However, you will still need to write your name and address in Japanese when signing the contract. It is unfortunately mandatory so if you are planning to apply for a Japan mortgage loan start your practice ASAP!
We hope that this article will be helpful for people who are interested in property purchase in Japan. If you have any additional questions related to Japan mortgage loan application, we would be more than happy to add them to our FAQ. Please do not hesitate to send them through our contact page.
You can also download the Guide-to-Mortgage-Loan-Application-in-Japan created by Japan Properties Co., Ltd.