What Financial Options are available to us foreigners?
Our last post went over the financial options which you can find in Japan for home purchases, a general rundown. In today’s post, we will focus on the financial options which are available to foreigners, more specifically those who do not currently hold permanent residence.
If you have permanent residence status, most of the banks/institutions we mentioned in our last post are willing to lend to you.
For part one of our two part series, click on the link below.
We will focus on four different options;
- Aeon Bank
- Shinsei Bank
- Tokyo Star
- SMBC Prestia
Also in our last post, we mentioned the possibility of borrowing from the financial institutions highlighted in our last post such as “Mega Banks.” Typically these banks will require the borrower to have at least a certain number of years of work experience with the same company. In the past, SMBC required the borrower to have at least 5 years work experience at a fairly large or “well known company.” You can always consult with the “Mega Banks” even if you aren’t currently a permanent resident.
All of the financial options highlighted below will require the borrower to have residency status in Japan.
Age Requirement: The borrower will need to be between the ages of 20 and 71. The final payment must be made prior to the borrower’s 80th birthday.
If the borrower chooses a financial plan which includes insurance to cover 8 different illnesses* and cancer, the borrower must be between the ages of 20 and 50.
Work Requirement: The borrower must be able to provide pay slips from his or her company for at least 6 months. For business owners and entrepreneurs, there will be a requirement of at least 3 years of operating and or running said business.
The borrower must have an income or operating income of more than ¥1,000,000 per year.
- The borrower must hold a visa with no restrictions on work.
- The borrower must be able to read and write and have a strong understanding of the Japanese language.
- A minimum of a 20% downpayment.
Loan Amount: between ¥2,000,000 and ¥100,000,000
Loan Term: Between 1 and 15 years.
For second market properties (second hand), the length of the home loan may vary. Also, for refinancing, the length of the loan will within the same period of the current home loan.
Interest Rates: Understanding the interest rate may be a bit tricky for those going through the loan process for the first time.
Each bank has what they call their base interest rate with each bank deducting a percentage, which in the end will become the borrowed interest rate.
To make things simple, the interest rate will be 1% more than what the bank advertises for their home loans.
For example, currently the variable interest rate is as low as 0.52%, the variable interest rate for this specific loan will be 1.52%.
Shinsei Bank offers foreigners in Japan an opportunity to take out a mortgage for their home purchase. Permanent residency isn’t one of the bank’s requirements however, the applicant’s spouse must be a Japanese Citizen or Permanent Resident. The spouse will then be the guarantor for the loan. The guarantor will not have a income requirement.
As for the applicant, the period of stay on his or her VISA must be longer than 1 year.
Age Requirement: The borrower will need to be between the ages of 20 and 65. The final payment must be made prior to the borrower’s 80th birthday.
Work Requirement: The applicant must be employed for more than 2 years as a full time or contracted employee. With a minimum annual income requirement of ¥3,000,000.
For the self-employed, the applicant has a requirement of engaging in his or her business for more than two years. Also, the applicant must have a two year average of more than ¥3,000,000 in profits.
- The applicant must have a current and working phone number in Japan.
- A 50m2 minimum requirement for the area of the home, and 30m2 minimum for condominiums.
- A property with an office space or commercial space, the residential space must be over 50% of the entire floor area. Also, the office or commercial space must be occupied (tenanted) by the borrower.
Loan Amount: ¥5,000,000 and ¥100,000,000
Loan Term: Between 5 and 35 years
For “long term” loans with fixed interest rates, the loan term will be between 21 and 35 years.
Interest Rates: The variable or floating interest rates come in at 0.45% and 0.65%.
As for the long term fixed interest rate for 35 years come in at 1.5% with the rate decreasing as the term shortens.
Shinsei Bank also provides a “Step-Down Long Term Interest Rate.” The interest rate will be fixed for the first 10 years, the rate then will decrease every five years.
Tokyo Star Bank
Tokyo Star also provides foreigners with financing his or her home purchase without permanent residency. Tokyo Star requires the applicant to currently reside in Japan as well as understanding the contract provisions in Japanese (with the help of a spouse or legal expert if needed).
Age Requirement: The applicant will need to be between the ages of 20 and 65. The final payment must be made prior to the applicant’s 75th birthday.
Work Requirement: A person who is able to prove with official documents that they have had stable income for at least one year as a full-time employee or at least two years as a corporate officer or self-employed person.
There is an income requirement for applicants. The applicant must have an annual income of ¥6,000,0000 or more (combined income). For single households, an annual income of ¥4,000,000 may be sufficient.
Loan Amount: ¥5,000,000 and ¥100,000,000
Loan Term: 1 to 35 years
Interest Rates: Tokyo Star does not advertise their interest rates online. For those who are curious about the interest rates, please consult directly with Tokyo Star.
Just as with other banks, Tokyo Star provides variable and fixed rates.
For fixed rates, 3, 5, 10 year terms are available.
As for the loan to value, in some cases expect at least a 50% downpayment when purchasing your home.
SMBC Prestia Trust Bank
Formerly Citi Bank, we feel SMBC Prestia is a bit more flexible when working with foreigners who want to purchase their primary residence. The other banks above, Shinsei and Tokyo Star are geared more towards the investor even though they provide home loans.
The applicant must be a resident of Japan but doesn’t need permanent residency to apply.
Age Requirements: The applicant must be 20 years old or older with the final payment made before the applicant’s 80th birthday.
Work Requirement: As the minimum requirement, the applicant must provide his or her offer letter from their employer, and provide a minimum of three pay slips.
There is an income requirement where the applicant’s annual income must be over ¥5,000,000.
Loan Amount: ¥10,000,000 and ¥500,000,000
Loan Term: 1 to 35 years
Interest Rates: Variable or floating interest rates between 0.47% and 0.72%. The percentage will depend on the loan value with a ¥100,000,000 or more loan at 0.47%, ¥50,000,000 or more loan at 0.57%, and 0.72% for the basic plan.
As for fixed term (up to 10 years), the interest rates range from as low as 0.7% up to 1.65%.
For the applicants with limited work experience with their current company, a loan to value of up to 80% is common.
SMBC Prestia does provide 100% loans as well.
As a general rule of thumb, expect to put down at least 20% if you currently do not hold permanent residency. Even though the banks may not advertise on their websites or literature, a downpayment requirement is very common.
We do recommend consulting with a bank or mortgage broker to see what options are available to you.
For additional information and or questions, please contact us here