Financing

Flat 35 Loan Interest Rate Drops for the First Time in Three Months

The Japan Housing Finance Agency (JHFA) recently announced the official August 2015 rate for “Flat 35” and “Flat 50” home mortgage loans that financial institutions can charge for these popular, securitized loan products.

Flat 35

Flat 35 loans are fixed interest loans with terms of 35 years, offered by a wide variety of Japanese banks, and securitized after drawdown by the JHFA. The JHFA is a Japanese public corporation similar to Fannie Mae in the US or the Canada Mortgage and Housing Corporation.

For August 2015, the interest rate for Flat 35 loans where the term is 21 years or above and less than 35 years, and where the loan amount is 90% or less than the price of the property, is between 1.580% and 2.230%. The majority of financial institutions which offer Flat 35 loans are offering rates of about 1.710% this month. This is the first drop in three months for this type of Flat 35 loan.

For loans where the payback period is 20 years or less and where the loan amount is 90% or less, the August 2015 rate is 1.350% to 2.000%, with the majority of banks offering the lower-end 1.350% rate. This is also the first rate drop in three months. In cases where the borrower is financing more than 90% of the purchase, the August rate is between 1.480% and 2.160%, with most banks offering the lower-end rate.

Flat 50

For Flat 50 loans where the term is 36 years or more and 50 years or less, and where the amount being financed is 90% or less, the August rate is between 2.130% and 2.880%, with the majority of banks offering 2.380%). Where the amount being financed is more than 90%, the rate is between 2.260% and 3.010%, with most banks offering 2.510%).

For comparison, according to Yahoo Finance, today’s average rate for a 30-year fixed rate mortgage originating in Los Angeles, California is 3.82%, down from 3.99% last week.

Qualifying for a Mortgage as a Foreigner

One of the merits of Flat 35 loans is that they guarantee fixed (“flat”) monthly payments over the life of the loan. To qualify, the house to be mortgaged must satisfy certain special JHGA conditions (e.g. energy efficiency standards, earthquake resistance measures, etc.). For more information, please see our articles on Home Mortgage Loans for Foreigners in Japan, Basic Requirements for Getting a Mortgage as a Foreigner in Japan, and this Home Buyer Profile.

Many Japanese banks do require non-Japanese home loan applicants to be married to a Japanese national or to have permanent residency (PR), but there are some banks that will lend to foreign nationals who have a working visa and a certain minimum annual income level, usually about 7 million yen, as explained in this article on Investing in Residential Apartment Buildings in Japan.

Source: SUUMO (Japanese)