In many countries, foreign nationals face restrictions when it comes to owning real estate. However, Japan stands apart as a country that allows foreigners to purchase and own properties just like Japanese citizens. If you’re considering buying property in Japan, one option worth exploring is obtaining a home loan. Home loans are specially designed loans to finance the purchase of residential properties and offer attractive interest rates (0.5% – 3%) and tax benefits. In this guide, we will walk you through the key points to consider when applying for a home loan in Japan as an expat.
Can Foreigners Get a Home Loan in Japan?
Yes, foreigners are eligible to apply for home loans in Japan. However, since foreign nationals may have a higher possibility of leaving the country in the future, banks may be concerned about the risk of borrowers defaulting and facing difficulties in the event of legal proceedings or enforcement overseas. Therefore, many banks require applicants to have a high likelihood of staying in Japan, and they often seek permanent residency as proof of commitment. Additionally, to qualify for a home loan, you must intend to use the property as your primary residence or for your family’s residency. Major banks typically require the following conditions to be met, ensuring foreigners can access home loans under the same conditions as Japanese citizens:
- Holding permanent residency or having a Japanese spouse as a guarantor.
- Having stable income and paying taxes in Japan.
- Residing in Japan for at least three months or more, which allows you to register as a resident (for more information on resident registration, refer to Japan Moving Made Easy: A Checklist for Stress-Free Relocation).
Can I obtain Permanent Residency?
To apply for permanent residency, you generally need to have resided in Japan for ten years or more, have complied with various public duties such as tax and pension payments, and have no violations of the law. However, if you hold a Highly Skilled Professional visa, you can apply for permanent residency after living in Japan for one year or more. Meeting the requirements usually results in the issuance of permanent residency in just a few months.
Advantages of Home Loans in Japan
Even if you have sufficient funds to purchase the property outright, taking out a home loan can still be advantageous due to the following benefits:
- Interest Rates: Japan has historically maintained low-interest rates, and currently, variable-rate home loans can be acquired at less than 1%.
- Tax Benefits: With the Home Loan Deduction (“Jyu-taku loan ko-jo”, or [住宅ローン控除]), when you purchase a newly built home using a home loan, you can receive tax deductions for ten years, receiving a refund equivalent to 1% of the loan balance from your taxes. The maximum refund is capped at 4 million yen over ten years.
- Group Credit Life Insurance (“Dan-shin”, or [団信]): A significant advantage is that you can apply for Group Credit Life Insurance, a unique insurance option in Japan. In the event of your death during the loan term, this insurance covers the outstanding loan balance. While eligibility depends on your health condition, this insurance is a notable benefit of home loans in Japan.
General Requirements for Home Loans
The following are typical requirements for home loans in Japan applicable to both Japanese citizens and foreign nationals.
Requirements regarding the person:
- Age: Applicants should be around 20 to 69 years old at the time of application and typically be able to complete the loan before reaching around 80 years of age.
- Employment Tenure: A minimum of 2 to 3 years of continuous employment is usually required.
- Income: The annual income should be between 3 to 5 million yen or higher.
Requirements Regarding the Property:
- The property should comply with the Building Standards Act, meaning it must be a legally approved building.
- The applicant should have ownership rights to the property (not leasehold rights, etc.).
Conditions Related to the Loan Amount:
- The loan amount can typically cover up to around 70% of the property’s purchase price.
- The loan amount may reach up to around 90% of the assessed value of the property.
- The total annual repayment for all loans should generally not exceed around 30% of the applicant’s annual income.
Home Loans Available Without Permanent Residency
If you don’t have permanent residency or a Japanese spouse, some banks still offer home loans to foreigners. Banks like SMBC Trust Bank and Shinsei Bank cater to foreign nationals with specialized home loan options. However, interest rates might be slightly higher due to the risk of borrowers leaving the country without repayment.
For foreigners without permanent residency, some banks in Japan offer home loans under specific conditions.
- Aeon Bank: Applicants should possess a valid residency status without any restrictions on employment and have an annual income of over 1 million yen.
- SMBC Trust Bank: Applicants should reside in Japan and have an annual income of over 5 million yen. English support is available.
- SBI Shinsei Bank: Applicants should have a Japanese spouse or possess permanent residency and provide a joint guarantor. An annual income of over 3 million yen is required.
- Bank of China: Available for Chinese nationals with a valid residency status.
- Bank of Communications: Available for applicants with a valid residency status and an annual income of over 3 million yen.
Conclusion
Acquiring a home loan in Japan as an expat may seem daunting, but with proper documentation and fulfilling the necessary criteria, it is entirely possible. Take advantage of the appealing interest rates, tax benefits, and the safety net provided by Group Credit Life Insurance. Be sure to explore loan options tailored to foreign nationals and choose the best-suited bank for your needs. Always seek advice from a qualified financial advisor or expert to make informed decisions and embark on your journey to owning a property in Japan.