We believe that at some point in your life in Japan you will start thinking about buying a house. Instead of paying a rental fee every month and getting just a temporary place to live, isn’t it better to spend money on getting your place? Of course, the process of getting a house is not easy and takes time and effort. However, we believe that with high-quality assistance, like those we offer in Japan Properties, a house acquisition can become a delightful journey which leads to the purchase of the house of your dreams.
We are here to assist you with any inquiry. Therefore in today’s article, we would like to discuss the mortgage loan acquisition and introduce the Mortgage Loan Calculator. Also, we have come up with a basic FAQ related to the mortgage loan calculator.
If you have any additional questions, please feel free to ask as at any time. We would be glad to add them to the FAQ. But first, let us introduce some basic terms which bank uses in its mortgage loan calculator.
What is Permanent Residency (PR hereafter) anyway?
Almost every expat who lives in Japan heard the word “Permanent Resident” or “Eijuken” at least once. We assume that most of you asked yourself questions like:
Who are these people and how did they get this PR? Is it worth to get it? What advantage do PR holders have in Japan?
We will try to explain some of the aspects of PR in Japan and its relation to the mortgage loan calculator.
PR a.k.a. Eijuken
In the Japanese language, permanent residency is called “永住権” – Eijuken.
The essential advantages of the PR are the following:
Easier to get loans at a better rate
No more visa renewal, the PR is valid for life
No restriction on the kind of activities you can engage in
So, PR holders have the advantage to be treated by banks the same way as Japanese citizens, which means that there is a higher chance to get a mortgage loan from a bank.
Many financial institutions treat people with PR the same as a Japanese citizen, guide them through the same path, use the same mortgage loan calculator. Banks ask the same questions whether you have PR or not. But, some requirements may differ in case if you do not have a PR. Banks tend to look closer to non-PR holder’s application.
If an applicant has PR, banks see this as evidence of intention to stay long-term and job security. Because the PR holders already went through the rigorous application process in the Immigration Bureau, so they feel more secure about these applicants.
The process of getting PR is slightly tricky. However, for the reasons mentioned above, it is worthwhile to make an effort to acquire it. Some requirements take time to fulfill, for example, you are expected to live in Japan for an extended period before application.
Here is the link to the Immigration Bureau of Japan website with a further explanation of PR acquisition process.
The following is a short list of question that we get from clients repeatedly. We thought it would be better to add them to the FAQ of mortgage loan calculator:
1. Can I get 100% loan from a bank?
Indeed, if you are a PR-holder, do not have any financial or any other issues and pay taxes on time then chances to get a full loan are high.
Generally, banks check the applicant’s profile and check if they have any savings to pay the downpayment. Banks value clients with savings because it shows better money management. Therefore, it depends on the applicant’s information whether is he/she getting a full loan or not.
For non-PR holders, it can be challenging to get a full loan. On the other hands, few banks are eager to lend money with a higher interest rate.
2. For how long one can get a loan?
Duration of a Loan: Certain banks assume that one can continue to work until 70 years old. Thus this person can pay the mortgage bills until this age. Therefore, to determine the loan period some banks will deduct your age from 70.
3. Am I eligible for a loan?
It mainly depends on the applicant’s profile and on the amount that he/she is willing to borrow from a bank. Every piece of information is essential for the mortgage loan calculator, even the age, marital status, savings, etc.
Banks will review everything and come up with an offer within two or three business days.
Therefore, it is better to be accurate with all statements that are being submitted to the bank.
4. What is lowest and highest interest rate for the mortgage loan calculator?
Usually, if the person has Permanent Residency, a bank can offer around 1% Interest Rate.
For non-PR holders, some banks might offer a 3-4% interest rate.
5. What documents do I need to apply for a loan?
Right apartments and ikkenya are sold out very fast, so the best thing to do is to start collecting documents ASAP. IT will help both the client and the real estate agent to proceed with the loan application and further to property purchase. We have published an article with the core documents list that is necessary to submit to the bank. You can find it here.
Mortgage Loan Calculator Example.
At the end of this article, we thought that it would be a good idea to come up with an example of a mortgage loan calculator. The following case study shows how some banks calculate the amount of a loan.
For example, we have Mr. John who is 35 years old, an office worker in a Japanese company. He is willing to buy property in Japan and has submitted the documents to the bank. Every piece of information as the client’s age, job position, visa type and income level play a significant role in the mortgage loan calculator.
- Name: Mr. John
- Job Position: Office Worker
- Age: 35 years old
- Visa Type: Permanent Resident
- Annual Income: 4 million JPY
- Amount to Borrow: 30 million JPY
In our case, Mr. John can get a loan for 35 years. Because as it was mentioned some of the banks previously assume that 70 is approximate retirement age. Therefore, 70-35=35, which means that banks think Mr. John will be eligible to pay a loan for the next 34 years.
To determine the amount of mortgage loan usually bank makes two calculations.
If the Annual Income is 4 million JPY, then bank assumes that 25% of this amount – 1 million JPY is the Maximum Sustainable Repayment Level. Bank divides this sum by 12 months, and this gives the Sustainable Monthly Payment Level – approximately 84000 JPY per month.
In our case, Mr. John wants to borrow 30 million JPY from a bank. Therefore, the bank makes the following calculation to decide whether they can give this amount to a loan or not. With the amount equal to 30 million JPY that is multiplied by 1% Interest Rate and divided by 420 months (35 years of the loan) we get approximately 84700 JPY.
This mortgage loan calculator amount does not significantly differ from the Sustainable Monthly Payment Level. Therefore, according to the mortgage loan calculator mentioned above, Mr. John is very likely to get the loan.
In conclusion, we want to say that this is just an example of a mortgage loan calculator amount decision and it may differ depending on the bank. However, it gives an idea of the process and the essential elements that influence on bank`s decision
Disclaimer: Information that we provide on the blog is accurate and correct to the best of your knowledge, but that there may be omissions, errors or mistakes. The results from the mortgage loan calculator presented in this blog should be used as an indication only. It is advised that you consult with our real estate agents before proceeding with any transaction.