Financing

Basic Requirements for Getting a Mortgage as a Foreigner in Japan

In a previous post, we pointed out that it used to be almost impossible to get a mortgage as a foreigner, but in recent years some Japanese banks will lend to foreign nationals with permanent residency (PR) status. In fact, one of the banks we’ll be covering today does not require applicants to have PR to apply for a loan.

In this article we will summarize some of the basic eligibility requirements. Specifically, we will focus on three banks (Citibank Japan, Shinsei Bank, and Suruga Bank) that have English-language web pages aimed at the foreigner market in Japan.

The information in this article is based on the English version of each bank’s website. We’re summarizing it here for our readers’ convenience, but cannot guarantee that it represents all of the requirements or is in line with the current official policy in Japanese. Please check directly with the bank if you are interested in applying.

Do I have to speak and/or read Japanese?

One thing to know upfront is that wherever you end up applying for a loan, all the documentation will be in Japanese. You may be provided with English translations as a rough guide, but ultimately, the legally binding documents you will be signing will be in Japanese.

Citibank Japan: No, you do not have to have Japanese language ability to apply for a mortgage with Citibank Japan.

Shinsei Bank: No, you do not have to have Japanese language ability to apply for a mortgage with Shinsei.

Suruga Bank: Yes, Suruga specifically requires that you have enough competence in Japanese to be able to understand their explanation of the mortgage product you are applying for and the provisions of the contract, otherwise you may be declined for the loan.

Do I have to have Permanent Residency (PR) or be married to a Japanese national?

Citibank Japan: Citibank Japan does NOT require that applicants have permanent residency or be married to a Japanese national, but you must be a citizen or resident of Japan.

Shinsei Bank: To be eligible to apply for a mortgage with Shinsei, you must be a Japanese citizen or a permanent resident of Japan.

Non-permanent residents are eligible to apply, but the applicant’s spouse must be a Japanese citizen or a permanent resident of Japan. In this case, your spouse must be appointed as a guarantor for the mortgage, but as the guarantor, your spouse does not have to to have a stable income.

Temporary non-permanent residents are not eligible to apply.

Suruga Bank: To be eligible to apply for a mortgage with Suruga as a foreigner, you must have permanent resident status or have in principle, received permission for permanent residence (or special permanent residence).

What are the age requirements for applying for a home loan?

Citibank Japan: You must be 20 years old and less than 75 years old at the time of final repayment.

Shinsei Bank: You must be between the ages of 20 and 65 when you take out the loan, and younger than 80 at maturity of the loan

Suruga Bank: You must be at least 20 years old but less than 65 years old when you take out the loan, and less than 76 at the time of the final repayment.

What are the income and employment requirements?

Citibank Japan: You must have a stable source of income over 5 million yen a year.

Shinsei Bank: You must have annual income before tax for the previous fiscal year of 3 million yen or more. You must also be continuously employed for 2 years or more. If you are self-employed, you must have business history of 2 years or more.

Suruga Bank: You must have annual income of at least 2 million yen (after tax); and have been continuously employed for at least 3 years. If self-employed, the business must have been in operation for at least 3 years.

Do I have to have a guarantor to apply for a mortgage?

Citibank Japan: No, to apply for a home loan with Citibank Japan, you do not normally need a guarantor.

However, any family member whose income is included in the calculations to determine your ability to repay the loan will be required to become a joint guarantor. Also, depending on the outcome of mandatory reviews conducted by the bank, anyone providing collateral may be required to become a joint guarantor.

Shinsei Bank: Yes, Shinsei Bank requires applicants to have a Joint Income Guarantor who meets certain age and income requirements and is related to you. Please contact Shinsei for more details.

Suruga Bank: No, Suruga Bank does not in principle require that you have a guarantor to apply for a home loan.

What are the other minimum eligibility requirements to apply for a home loan?

Citibank Japan: Aside from the requirements above, you must also be eligible for group life insurance to apply for a mortgage.

Shinsei Bank: To apply for a home loan with Shinsei, you must also 1) have an existing PowerFlex account with Shinsei Bank or open a PowerFlex account concurrently with the loan application. There are also specific requirements for foreign nationals and U.S. citizens who open PowerFlex accounts. You must also 2) be qualified for group life insurance.

Suruga Bank: To apply for a home loan with Suruga Bank, you must also be eligible for group life insurance.

What interest rate can I get?

The available rates differ depending on whether you apply for a fixed or variable-rate loan, the term of the loan, your repayment plan, and other factors. Please contact each bank directly for more details.

As a reference point, the official April rate for a Flat 35 loan (where the payoff period is more than 21 years but less than 35 years) and where the loan-to-value (LTV) ratio is less than 90%), as announced on April 1, 2016 by the Japan Housing Finance Agency (JHFA) is 1.190%.

As we reported in this post, the current rate is the lowest in history.

In Japan’s negative interest rate environment, there is heated competition among banks for consumers looking to re-finance and to originate new mortgages.

Flat 35 loans are fixed interest loans with terms of 15 to 35 years, offered by a wide variety of Japanese banks, and securitized after drawdown by the JHFA. To qualify however, the house to be mortgaged must satisfy certain special JHFA conditions (e.g., energy efficiency standards, earthquake resistance measures, etc.). Read more about Flat 35 loans in our post about Home Mortgage Loans for Foreigners in Japan.

How much can I borrow?

Citibank Japan: You can borrow between 10 million and 200 million yen, in increments of 100,000 yen. The loan amount must be less than 90% of the purchase price or the assessed value of the collateral, as established by Citibank, whichever is lower. Also, the loan-to-value (LTV) ratio will depend on your annual income, the property, and other factors.

Shinsei Bank: You can borrow between 5 million and 100 million yen, in increments of 100,000 yen.

Suruga Bank: You must borrow at least 1 million yen and can borrow up to 100 million yen.

What are the available loan terms?

Citibank Japan: From 1 to 35 years.

Shinsei Bank: From 5 to 35 years, in one year increments.

Suruga Bank: From 1 to 35 years.

What can I borrow money for? Can I get a loan for an investment property?

Citibank Japan: Citibank Japan offers both home loans and investment property loans.

The requirements for investment loans are different. For example, for an investment loan, applicants must have annual income over 7 million yen. The amount you can borrow is also less (between 5 million and 100 million yen); and the loan-to-value ratio must be less than or equal to 80% of the purchase price or assessed value, whichever is lower. Please contact Citibank Japan for specific details of the requirements for investment property loans.

Shinsei Bank: Shinsei’s PowerSmart Home Mortgage is only available for financing a residence that you or a family member will live in. It must also be used for the following purposes: to 1) buy a detached house or apartment, including second-hand properties, 2) construct a new house on land already owned. The loan disbursement will be executed in a lump-sum upon completion of the construction of the house. 3) refinance a mortgage from another financial institution. Partial re-financing is not available.

Home loans are NOT available for vacation properties, renovations land-only purchases, unless the applicant owns the house already built on such land. There are also a number of situations pertaining to the property itself which may make it ineligible for you to apply. Please contact Shinsei directly for details.

Suruga Bank: Suruga Bank offers loans for: 1) The purchase of a house or land for a house in which the applicant or applicant’s family will live, 2) Expenses for additions, repair, or improvement to your house, 3) Refinancing of an existing mortgage, 4) Other expenses for new construction or change of residence, etc.

You may also be interested in: Home Mortgage Loans for Foreigners in JapanInvesting in Residential Apartment Buildings in Japan, and Home Buyer Profile: French-Japanese family buy their “almost” dream home in Japan

Updated as of April 12, 2016