Hi, I am Takeshi Hirano, the REDS agent.

When a foreign resident applies for a mortgage in Japan, there are several specific points and conditions to be aware of. While it is possible for foreign nationals to access mortgages under the same conditions as Japanese citizens, financial institutions tend to apply stricter screening criteria for foreign applicants. Meeting the necessary requirements is crucial. Below are key points that foreigners should be aware of when applying for a mortgage in Japan.

Residence Status Confirmation

First, an appropriate residence status is required to apply for a mortgage in Japan. Foreign nationals visiting Japan for a short stay or on a tourist visa are generally not eligible for a mortgage. Applicants are typically required to have one of the following residence statuses:

Permanent Resident:

If you have permanent residency, some financial institutions may allow you to apply for a mortgage under conditions similar to those for Japanese citizens. Permanent residency is often considered a strong indicator of financial stability, which may help streamline the approval process.

Special Permanent Resident:

Those with special permanent resident status, often referring to long-term Korean or Chinese residents in Japan, may also be treated similarly to permanent residents.

Long-Term Visa Holder:

Foreign nationals holding work visas, such as “Engineer/Specialist in Humanities/International Services” or “Skilled Labor,” and planning to stay for three or more years, can also apply for a mortgage. However, a shorter remaining visa duration may negatively impact the review process.

Employment Stability

“Stable income” is a key factor in mortgage approval. If you work in Japan as a full-time employee or even as a contract employee with a consistent income, you will have a better chance of passing the mortgage screening. The following factors are crucial in the screening process:

Years of Employment:

Generally, financial institutions require applicants to have been employed for at least 2-3 years. For foreign nationals working for foreign-affiliated companies, financial institutions may scrutinize stability more carefully.

Income Level:

While income requirements vary between financial institutions, a minimum annual income of around 4 million yen is often required. Higher incomes typically increase the potential loan amount.

Down Payment and Personal Funds

Foreign nationals may be required to provide a larger down payment than Japanese citizens. While a down payment of around 20% of the purchase price is commonly recommended, foreign applicants might need to provide more to reduce future risks for the financial institution. Having substantial personal funds can also increase your credibility as a borrower.

Credit History in Japan

Having a credit history in Japan is an important factor. Your use of credit cards and repayment history on previous loans can influence your application. Foreign nationals with short stays in Japan may lack sufficient credit history, making approval more difficult.

Credit Score:

A strong domestic credit score is required, which includes checking whether you’ve consistently made timely payments on credit cards or other loans.

Credit Information:

Financial institutions will check your financial history through credit information agencies. If your credit history in Japan is limited, you may need to supplement it with credit records from your home country, though some institutions may not consider foreign credit histories.

Loan Repayment Term and Age

The repayment term is often limited by the applicant’s age. Generally, the loan must be fully repaid by the age of 75. As applicants get older, the repayment term may be shortened, which increases monthly payments. For example, applicants over 45 may be limited to a maximum loan term of 20 years.

Risks Associated with Purchasing Property in Japan

Foreigners purchasing property in Japan should consider potential challenges like career changes or returning to their home country. If you need to move abroad, managing or selling your property in Japan may become an issue. There is also the risk of foreclosure if you default on loan payments.

Available Financial Institutions

Not all financial institutions in Japan offer mortgages to foreigners. Typical options include:

Mega Banks (e.g., MUFG, SMBC, Mizuho):

These large banks offer mortgage products for foreign residents, primarily targeting permanent residents and long-term visa holders.

Regional Banks or Credit Unions:

Some regional banks offer mortgage services to foreign nationals, particularly if they specialize in the local real estate market.

Specialized Foreign National Mortgages:

Some institutions offer mortgage products specifically for foreign nationals, with services and support available in English and other languages.

Japanese Language Proficiency Requirements

Mortgage screening and contract procedures often require communication in Japanese. Certain steps demand proficiency in Japanese, including:

Communicating with Financial Institutions:

You will need to handle direct communication with financial representatives, which requires understanding and responding to questions in Japanese. Being able to comprehend complex financial terms and legal documents related to loan agreements, interest rates, and repayment terms is essential.

Preparing and Submitting Documents:

Mortgage applications require many documents, many of which are provided in Japanese. Applicants must understand and complete documents like income certificates, residence cards, and tax-related paperwork.

Understanding Contract Details:

Given the long-term nature of mortgage contracts, it is crucial to fully understand the terms, including the differences between fixed and variable interest rates, repayment conditions, and early repayment rules. Inadequate language skills could lead to misunderstandings and potential disadvantages.

Support Options for Language Issues

Even if you’re not confident in your Japanese language ability, there are several ways to obtain support:

Interpreter or Translation Services:

Many real estate companies and financial institutions provide services in English or other languages. You can hire interpreters to ease the language barrier and help facilitate the process.

Foreign-Language Support at Banks:

Some banks offer foreign-language support, especially mega banks or financial institutions that specialize in services for foreigners. These banks may allow you to conduct consultations and sign contracts in English.

Support Options

If the mortgage application and process seem complex, you may benefit from support services such as real estate agents or loan consultants. Real estate agencies that cater to foreign nationals often provide full support in English, from mortgage application to property purchase.

Conclusion

When foreign nationals apply for a mortgage in Japan, factors like residence status, income, and credit history are key, alongside Japanese language proficiency. If language is a concern, taking advantage of foreign-language support services offered by financial institutions or using interpreters can ensure smoother processing. With proper preparation and support, securing a mortgage in Japan can be managed confidently and successfully.

If you would like to purchase a property using housing loans, please feel free to contact us to the following e-mail address at any time.

【REDS】Real Estate Distribution System (REDS) Japan

Takeshi Hirano (Mr.)

mailto: ta.hirano@red-sys.jp