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Obtaining financial backing for a house purchase in Japan is quite difficult for natives, and even more so for expats. Generally, Japanese lenders will only countenance offering mortgages to non-nationals if they have stable employment plus either permanent residence or a Japanese spouse. This rule has been relaxed a little recently, and, though their terms are less flexible, Japanese lenders still offer the best deals in many ways.
The largest Japanese banks are Bank of Tokyo-Mitsubishi UFJ, Sumitomo Mitsui Banking Corporation and Suruga Bank. It may also be possible to obtain a mortgage at a Public Housing Loan Corporation. As it will be hard to obtain a mortgage from a Japanese lender, you will almost certainly need to do some shopping around. Your estate agent should help you to find a good deal, and you could additionally hire the services of a bilingual mortgage broker, as these are not tied to specific lenders. The broker will charge a percentage of the loan amount as a fee.
If you have no luck with Japanese lenders, you could try a foreign lender established in Japan, such as the Commonwealth Bank of Australia, National Australia Bank or the US-based Citibank. Lenders such as these are likely to be more flexible than the local ones and offer you a more reasonable deal, though their interest rates are usually higher.
Otherwise, you could choose to obtain a mortgage from a lender in your home country. In this case, you should be aware that currency fluctuations may lead to you paying more over the years of repayment than you originally planned.
As mentioned above, being a permanent resident or having a Japanese spouse is virtually a requirement. Furthermore, the property the mortgage is for must be your primary residence. It will also help your case if you have been working full-time in Japan for at least three years, with a salary exceeding ¥2 million. If you are working for a well-known Japanese company, so much the better. Speaking Japanese also helps, and the more of these things you have in your favour, the more likely you are to get lower interest rates.
Note that the mortgage amount is based on the lender’s appraisal, not the value of the property, and that the former is normally lower than the latter. As this usually leads to a shortfall, even if you can get a 100% mortgage, you may still have to make a down payment.
Some Japanese banks are prepared to offer 100% mortgages to expats who are permanent residents. However, a more typical loan-to-value ratio (LTV) for a Japanese mortgage is 90% of the property value, meaning that you will need to make a down payment of at least 10%. The largest Japanese banks tend to offer the best interest rates. E-Loan is a useful site for comparing the terms different Japanese lenders offer. (It is in Japanese only, so you may need to find someone to translate for you.)
Around two-thirds of Japanese mortgages are hybrid, i.e. set a fixed interest rate for a period of from one to ten years, then variable. About a sixth of mortgages in Japan are completely variable, and a further sixth have the interest rate fixed for the full term of the loan. Some banks offer additional features such as flexible repayment, health insurance option and repayment holidays.
If you are making an application to a Japanese lender, all the paperwork will be in Japanese, so you may need someone who is fluent in the language to help you. In addition to the mortgage application form, the documents you need to apply for a mortgage will include:
The lender is usually able to make a decision on the loan application within a month, though it may take up to two.
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