Mizuho Bank to offer home equity loans

Mizuho Bank are now offering home equity loans of up to 10 million Yen to home owners. Mizuho is the first of Japan’s three mega-banks (Mizuho, MUFJ and SMBC) to offer a home equity financing.

Interest rates are floating and were 2.975% in August. This rate is lower than their rates for personal loans. Customers of Mizuho with existing home loans may receive a rate of 2.675%.

Loans range from 1 ~ 10 million Yen and will be determined based on the equity in the property and the borrower’s financial position. Borrowers can use the funds freely, but cannot put them towards company capital or the purchase of financial products.

Sources:
The Nikkei Shimbun, August 21, 2014.
The Sankei Shimbun, August 21, 2014.

More borrowers choosing full-term fixed rate home loans

According to the latest survey by the Japan Housing Finance Agency, the percentage of borrowers choosing a fixed interest rate for the entire duration of their home loan was 31.7% between November 2013 and February 2014, up 6.4 points from the previous period and up 8.6 points from the same period last year. The percentage of borrowers electing for a floating interest rate dropped 4.2 points from the previous period to 37.1%. 

Finance options

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.


BANKS

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.

Requirements:

  • 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. Show Foto 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.

Mizuho reducing home loan interest rates to 0.55%

In an effort to attract borrowers looking to purchase before the increase in the consumption tax rate, Mizuho Bank announced that they will be lowering their prime interest rate on their 2-year fixed-rate mortgage from its current level of 0.95% to 0.55%. The ultra-low interest rate campaign will be offered until the end of March 2014. It is possible that other banks will soon follow.

Mizuho and two other banks have also lowered the prime rates on their 3-year fixed-rate mortgages to 0.60%.

Source: The Nikkei Shimbun, January 9, 2014.

Mizuho and Sumitomo Mitsui to lower interest rates

Mizuho Bank and Sumitomo Mitsui Trust Bank are lowering their prime lending rates on home loans this month.

Mizuho is reducing the interest rate on their variable and fixed-type mortgages by 0.1%, while Sumitomo Mitsui will be reducing their variable rate from 0.775% to 0.725%. This will be the first time since November 2010 that Sumitomo Mitsui has reduced their variable rate.

Fixed or floating: Which type of home loan interest rate is right for you?

For many, buying a home is the largest purchase they will make in their lifetime, but it can also be one of the biggest debts they take on. Choosing the type of mortgage – fixed-rate or variable rate – can be a difficult decision to make.

Fixed-rate loans offer stability as the interest rate is fixed for the duration of the term. With variable-rate loans, however, there is a risk that you repayments may rise in the future. Variable-rates are typically reviewed twice a year.

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