As the title says, I would like to ask for your advice about getting a mortgage loan in Japan.
In general the interest rates seem to be really low compared to other countries.
Even though every Japanese person I talked to is recommending me a loan with variable and therefore lower interest rates, I tend to fixed ones since I expect the market to change a lot in the next years (while not knowing what that means for the interest rates).
I got told that even with variable interest rates, there are legal protections such as caps which prevent the rates to increase too much.
What do you know?
6 comments
When you buy a property in Japan, you either hire a buyer’s agent for about 3% of the purchase price or you just pay that same amount to the seller’s agent directly. You pay the 3% no matter what, so why not hire the buyer’s agent at the beginning?
Do you know what buyer’s agents are good at? Find you a loan and explaining the whole process of applying for it.
Anyway, to answer your question, there is no way to predict with certainty the future interest rates of variable rate loans. It all depends on your appetite for risk. But consider this: variable rate loans are by far the most popular loan in Japan, and Japanese people tend to avoid risk.
Fixed rate loans like the FLAT 35 Loan are really for people who don’t really qualify for other loans because they are too old or their income is too low. But you have to be a citizen or have PR status to get this kind of loan.
https://www.reddit.com/r/JapanFinance/wiki/index/spending/real-estate
You can split your mortgage into two, with half at a variable rate and half at a fixed rate. That’s what I did.
There’s a massive difference between flat 35 currently sitting at 1.44% and good variable deals around 0.3%. Monthly payments are capped for 5 year period even if the underlying interest rate changes and after that any increase can only be max 25% higher than the preceding 5 year period. What happens instead is the ratio of interest to principal you pay every month changes, effectively stretching out your loan and having you pay it off longer.
Another unique thing is group life insurance where if you get cancer or a serious sickness leaving you unable to work for more than a year the whole mortgage is written off. That might be another 0.2% on top of your variable rate.
You should really research this in Japanese as it’s thoroughly explained and most house builders and banks can explain the details further if you pass the credit checks.
If you take life insurance with loan (and you should), make sure to read the fine print.
Those banks offering cheap rate and cheap insurance usually have condition that the insurance will kick off if you spend N number of days in the hospital, where N is much greater than the average number of days for that sickness. So basically, you will be paying for nothing.
I found that Resona and Mizuho had reasonable rates and insurance packages. They also ones of the few banks offering mixed loans (i.e. part of the loan is variable, and part – fixed rate).
This is a terrible post. Entire books can be written about this topic.
What specific questions do you have about home loans?
Let me help you out here: go to a real estate office. Go to a bank branch which specializes in home loans. Talk to a real human. Bring a translator if you have to.