Getting a Property Through Bank Financing; Bank Loans for Foreigners in Japan

WeXpats

2020/09/07

Life in Japan

Securing your own home in any country is both a momentous and heavy task. Property in Japan is often very expensive and the common way to acquire one is through bank financing. In this article, we will provide the information that you need to know to finally have the house you’ve always wanted to own.

Table of Contents

Bank Financing for Foreigners in Japan
Prerequisites to getting a loan in Japan
Banks that provide financing to foreigners
General Loan Procedure
Summary

Bank Financing for Foreigners in Japan

Once you’ve decided on the different factors (such as the type of property, personal income level, location, and desired tenant) to consider when buying real estate in Japan, the next thing you need to do is to obtain the necessary funding for it.

The general rule of thumb is that you may finance any property in the world as long as you are a native citizen or you have a Permanent Residence Visa in that country. In Japan, foreigners are able to purchase real estate and contact Japanese financial institutions for financing but there are a number of prerequisites that have to be met.

Writer's Pick

Prerequisites to getting a loan in Japan

The general prerequisites include (but is not limited to) the age of the person taking out the loan (and how old you will be when you pay off the loan), years of employment in Japan and yearly income in addition to your visa status in Japan.

To minimize the risk of having problems regarding the repayment of the mortgage loan, most Japanese financial institutes are restricting that the applicant is someone who has either:

Permanent Residency status
a Japanese spouse
or a residence period in Japan long enough to be eligible for applying for Permanent Residency status

Moreover, the majority of the financial institutions listed above give these conditions as their prerequisites:

Someone who has Permanent Residency status or who has a Japanese spouse.
Someone who is living in and working long-term in Japan

*conditions must be supported with legal documents

In addition, most of the financial institutions will have all the documentation in Japanese so you must be able to read and write in Japanese in those cases. Interpreters may help you with accessing the financial institutions and understanding the terms and condition of the agreement, but ultimately, the legal documents required in financing your properties will be written and signed in Japanese. There are some exceptions.

Just like its financing terms, the prerequisites needed to own a property also varies from one financial institution to another. This highly depends on the conditions and the distinct screening processes of your chosen financial institution.

Lastly, it is generally required to have enough funds to pay roughly 15% of the price of the property. Most of the times, the cash will be used to:

Pay the down payment (usually 10-15% of the purchase price)
Pay miscellaneous fees which are usually between 6-8% of the price
Provide as proof that the applicant is able to cover the remaining balance of the loan, because the mortgage covers most (the percentage depends on the agreement with the bank) but not all of the property price.

Banks that provide financing to foreigners

The financing terms for a housing loan differ from one financial institution to another. Usually, you can get a loan up to 100 million yen or in some cases, 500 million yen and it can be repaid between 25 and 35 years. Below is the list of the most common banks that provide help in financing to foreigners (Please note that most websites are in Japanese):

All of the above have a loan limit of 100 million yen except for Mitsui Sumitomo Trust and Finance which has a loan limit of 300 million yen and Prestia SMBC Home Mortgage Loans and Shinsei Bank which has a loan limit of 500 million.

Prestia and Tokyo Star Bank do not require Permanent Residency, while the others do with a few exceptions. For example, Shinsei Bank does not require you to be a permanent resident or Citizen only if you have a spouse who is a citizen or has permanent residency. English assistance is available for Prestia, Tokyo Star Bank and Shinsei Bank.

Of course there are many other banks that provide loans, such as Suruga Bank, CitiBank and Orix Bank Corporation. Please check with your local bank to see if they give loans to foreign nationals and what is required of you.

And there are a few foreign banks that offer loans with their own requirements as well.

Please check out the following and their websites:

General Loan Procedure

And last but not least, here is the basic procedure when getting a loan from the bank.

1. Decide on a property and apply

Deciding what type of property, the location, and desired tenant is crucial. Location is the most important factor to be considered because the purchase price of the property highly depends on it.

2. Do a pre-application (事前審査 jizenshinsa)

The financial institutions acquire general information such as income level, credit score, employment status, civil status, etc. The result of this process is available within 2-3 days of the submission of all documents.

3. Proceed with the housing loan application (本審査 honshinsa)

Once the pre-application is approved, you can officially apply for the mortgage.The process usually takes around 2 weeks, up to 1 month. If this part falls through, then the sale of the property cannot take place and you will have to reapply with either a different amount lower to the original application or to a different bank.

4. Sign the loan agreement

The starting date for the execution of the loan is determined at the time of signing.

5. Execution of loan and settlement

The loan amount is then transferred to your account on the date that was agreed upon, which executes the mortgage loan. You can now proceed to settling the loan you successfully acquired.

Summary

The information provided above includes general procedures and requirements to give you an overview on what you should expect when you are looking into getting a property through bank financing. To know more about the processes involved, please contact your preferred financial institution. The details may have changed since the time of publication.

Overall, securing finance, especially on foreign ownership, can be challenging. Japan properties are not an exception to that. However, having the necessary requirements needed to acquire mortgage loans and knowing which financial institutions are available to help are crucial in the process of owning the property of your choice.

We hope that the above information is helpful in securing a housing loan and getting the property you always wanted in Japan!