Buying a property in Japan is not difficult as there is no restriction for anyone to buy a property here. However, the difficulty to buy a property in Japan is based on your type of payments. If you are planning to purchase a property outright with cash, it is going to be easy even you are only having a tourist visa. However, if you are going to buy a house with a mortgage loan from a Japanese bank, foreigners with tourist visa are not eligible to get a loan. You will at least need to own a working visa or spouse visa to proceed, but of course, Permanent Resident visa will be the best. It is not difficult to get your loan approved if you are able to meet the bank’s requirements based on the following 3 criteria:
1. Property
2. Working status and salary of the applicant
3. Type of visa held by the applicant
1. Property
The amount of the loan can be borrowed will be based on the value of the property instead of the purchase price of the property. If the assessed market value of the property is lower than the purchase price, then the applicant will only able to receive the loan at maximum of the value of the property. Besides, Japanese bank will only approve the loan for property that is more than 30m2 in size. Otherwise, the applicant needs to apply for a free loan that will be charged at a higher interest rate (about 3%).
2. Working status and salary of the applicant
The applicant needs to work as a full-time in Japan and a few years working experiences in Japan will be preferable. However, if the applicant changes his job just before he/she applies for a loan, this will highly reduce the possibility for him/her to get a loan even he/she has been working for many years in the previous company. The basic requirement on the salary of the foreign applicant in order to apply for a loan in Japan is to have a minimum yearly income of 5,000,000 yen (for Prestia Bank). Besides considering the value of the property, the maximum amount of loan can be borrowed by the applicant is also based on the following calculation:
Maximum amount of loan = Yearly income X 8
[Case Scenario #1]
Name: Ethan Chan
Annual Income: 8,000,000 YEN
Value of Property: 70,000,000 YEN
Maximum amount of loan
= 8,000,000 X 8
= 64,000,000 YEN
Therefore, the maximum loan amount that can be borrowed by Ethan Chan is 64,000,000 YEN only, although he would like to purchase a property, which is valued at 70,000,000 YEN.
[Case Scenario #2]
Name: Gary Hilton
Annual Income: 10,000,000 YEN
Value of Property: 70,000,000 YEN
Maximum amount of loan
= 10,000,000 X 8
= 80,000,000 YEN
Even though the maximum amount of loan can be borrowed by Gary Hilton is 80,000,000 YEN, he will only be able to receive 70,000,000 YEN at maximum from the bank because the bank will not finance more than the property's value.
His/Her Company’s reputation and financial condition will also affect the possibility to get the loan indirectly.
3. Type of visa held by the applicant
For Japanese residents, it will be much easier to apply for a loan with a low interest rate. Usually the interest rate for Japanese residents will be around 0.625% to 0.9%. For foreigners, the interest rate will be about 3.9% if a foreign applicant doesn’t own a
Permanent Resident (PR) Visa. If he/she owns a Permanent Resident (PR) visa, he/she will be able to apply for a loan with the same interest rate as the Japanese residents. Most of the time a foreigner with PR visa will be able to get a loan easily if he/she has a good and stable financial condition.
There is also a possibility for foreign applicant with working visa/spouse visa to apply for a loan, but the interest rate will be about 3.9%. Foreign applicant with spouse visa might be able to get a loan with lower interest rate, but he/she has to provide evidence that he/she has been staying here for at least 5 years, pay 20% by cash and a guarantor is required (for Mitsui Sumitomo Bank). For foreign applicant without a PR visa, he/she needs to have personal fund of about 10% to 20% of the property price because usually foreign applicant will only eligible to get 80% to 90% loan.
However, the requirements for mortgage loan vary according to different banks and time. If you would like to know more on your eligibility for mortgage loan, please do not hesitate to consult us for professional advices.
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