Guide to Home Mortgage Loans in Japan
Overview of Housing Loans in Japan
The prerequisites for a housing loan vary according to each financial institution. The following are general prerequisites along with a summary of housing loans in Japan. A housing loan is usually applied for when buying (a house that you and your family plan to live in), renovating, or refinancing a home.
General Prerequisites for housing loans among Japanese finacial institutions
Prerequisites for Loan applicants
Age
Age at the time of loan application should be over 20years old to between 65-69 years old. Age at the time of completing payment of a loan should be around 75 – 80 years old.
Years of continuous employment in Japan
At least 2 to 3 years or more. *There are some exceptions.
Yearly income
Minimum yearly income should be between approx. JPY2,000,000–5,000,000.
Those who eligible to take out Group credit life insurance
(It may be voluntary in some institution)
Prerequisites for the Property
A building should be built in accordance with the Building Standard Act.
It should come with landownership.
Loan Amount
Up to JPY100,000,000 or JPY500,000,000
Generally loans will cover up to 70–80% of the purchased amount and up to 90% of the assessed value of home equity by a financial institution. The total amount of the loan to be repaid each year (Debt-to-income ratio) should be within a general range of about 25%–35% of one’s yearly income.
Life of Loan
From 1–35 years
Loan interest
Various types of loan interest rates are available. There is floating rate interest, fixed rate interest for a certain period of time, and a fixed rate interest for the entire life of the loan type.
Example
Repayment Methods
There is the principal and equal interest system of repayment, capital equal system of repayment, and Bonus repayment.
Prepayment:
Small amount of prepayment by using the internet and automatic system for prepayment are available.
Handling fees vary depending on method used.
Guarantor and Guarantee Charge
Guarantee by the Credit Guarantee Company often becomes a prerequisite to a loan. In this case it costs a certain amount of guarantee charge, which is sometimes included in a loan interest. Some financial institutions don’t require both a guarantor and a guarantee charge.
Group credit life insurance Premiums
Group credit life insurance is required to be taken out. The insurance premiums are often included in a loan interest, or paid by a financial institution.
Handling Fee
It varies depending on the financial institution. An example estimate would be about JPY32,400–108,000.
