Applying for a Real Estate Loan in Japan as a Foreigner
2023-03-23
Real Estate Investment in Japan
The Japanese real estate market is an attractive investment market where foreigners are free to buy and sell property just as Japanese nationals can.
One way to obtain financing in order to buy property in Japan is to take out a loan from a financial institution.
In this article, we explain the conditions and general procedure for applying for a real estate loan in Japan.
■ The two major types of real estate loan
The two major types of real estate loan in Japan are the “home mortgage loan” and the “real estate investment loan”. There are important differences between these two loans, so it is a good idea to understand them in order to choose the right one.
Home Mortgage Loan
A home mortgage loan or housing loan is a loan that you can use to purchase real estate for the purpose of personal residence. It can have fixed interest rates for long periods of time, and allows you to get deductions on your income tax in Japan.
However, having permanent residency in Japan is one general prerequisite of getting a home mortgage loan. Furthermore, this loan cannot be used to purchase a property for investment purposes.
Real Estate Investment Loan
A real estate investment loan is a loan you can use to purchase real estate for the purpose of investment or asset management.
The conditions for applying for a real estate investment loan varies by financial institution, but in general, the maximum loan amount is 200 million yen, the interest will have a floating rate, and the maximum term is 35 years (with certain age limits).
Even foreign nationals can apply for a real estate investment loan. However, there are certain conditions you have to meet, and depending on your circumstances, you may have a limited choice in the banks or financial institutions you can use.
■ Real Estate Investment Loan condition 1: residency in Japan
One of the biggest factors in the eligibility for a real estate investment loan is whether you have permanent residency in Japan.
If you are a permanent resident of Japan, you can generally avail of a real estate investment loan in many banks and financial institutions to the same extent as a Japanese national.
However, if you do not have permanent residency, your options will be much more limited. Some banks may offer loans to Japan residents who do not have permanent residency. But if you are residing overseas, you should consider getting a loan from a bank in your home country that also has branches in Japan.
The following are some banks and financial institutions that offer real estate investment loans to foreign nationals who do not have permanent residency in Japan.
・ORIX Bank
https://www.orixbank.co.jp/personal/property/account.html
・Saison Fundex
https://www.fundex.co.jp/personal/investment/
・Prestia (SMBC Trust Bank)
https://www.smbctb.co.jp/product/loan/investment_loan.html
■ Real Estate Investment Loan condition 2: annual income, age, property
The specific conditions and requirements for foreign nationals to be able to get a real estate investment loan in Japan varies for each financial institution, so you should inquire to confirm the details.
The following are some of the typical conditions set by many financial institutions.
・Annual income
Financial institutions will check if you have a stable annual income above a certain amount. This is to ensure that you can still pay back the loan even in cases where you are not earning income from the investment property.
・Age
Most banks require you to be at least 20 and not more than 60 years old to get an investment loan. You must also be under 80 years old at the time of full repayment. In general, the older you are, the harder it is to get a loan, since your income will likely decrease at the age of retirement, and a shorter loan term would give you a higher debt-to-income ratio.
・Property
Most financial institutions also set various conditions for the property you are purchasing. One typical condition is the age of the property. It may be harder to get a loan for older properties that are near the end of their legal service life. For example, reinforced concrete buildings in Japan have a legal service life of 47 years. You should confirm the structure and age of the property you are purchasing in advance.
■ Consult with a financial institution before choosing a property
As a foreigner looking to buy a property in Japan through a real estate investment loan, it is a good idea to consult with a financial institution before deciding on the property you want to buy. This way, you can understand the specific conditions set by the financial institution for offering the loan. While the general conditions might be listed in the financial institution’s website, there may be other unlisted requirements and criteria.
Even just visiting the bank or contacting their real estate investment loans department and listening to their response to your inquiry allows you to roughly gauge whether you can get a loan from them or not. Of course, it is also a good opportunity to confirm their specific conditions, loan procedures, required documents, fees, and other important information.
At wagaya Japan, we can also introduce financial institutions that offer real estate investment loans to foreign nationals.
■ Summary
It may not always be easy for foreign nationals to get a real estate investment loan in Japan, but where there’s a will, there’s a way.
The key to successfully getting a loan is to obtain the proper information and understand the detailed conditions for the applicant and the property set by the financial institution.
At wagaya Japan, we have highly-experienced multilingual staff who can provide total support for your real estate investment in Japan. Contact us for any inquiries and consultations regarding property search or real estate loans.