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Like most countries, Japan has numerous financial institutions that grant loans whenever a request is made, as long as the individual meets the requirements.
This option is not limited to citizens only but can also be used by foreigners who come to the country.
It is also not limited to personal loans, Home loans are also available, to help people own their own place.
It is absolutely imperative to understand that the terms for loans and mortgages differ from country to country.
Over the last few years, loan interest rates in Japan have remained low, and due to this many people who buy real estate contemplate using a loan to do so.
In this article, we’ll be discussing some types of loan in Japan and how home loans in Japan are calculated so you will know how much you can afford to borrow.
Let’s dive in.
What is a Home Loan?
A Home loan is a loan granted by banks to help the borrower purchase a house which they can’t afford to pay for at the moment.
Below are steps to help you calculate the amount of Home Loan that you can afford to borrow:
Amount required for a down payment
The borrower should be able to pay at least 20% – 35% of the property price. This money will cover the loan down payment, the earnest money, and different incidental fees at the time of purchase.
There is also an additional fee of around 6% for taxes and 3% brokerage fee if you use an agent for the purchase. This will be added to the down payment.
Amount allowed to be borrowed for a Home Loan
Lenders in Japan will let you borrow around 8 times your yearly income, as long as you don’t spend more than 25% of your monthly gross income on mortgage repayments.
The lifetime of a Home Loan
In Japan, the lifespan of a home loan is between 1-35 years. Generally, applicants who are between the age of 20 and 69 will be granted a home loan.
However, you should plan to have your loan fully settled by the age of 75-80 years to be qualified for your selected time span.
Interest rates on a Home Loan
There are two types of interest rates to choose from:
- Fixed interest rate
- Floating interest rate
1. Fixed intetest rate: These rates in Japan are generally very low. The rates for 10-year fixed mortgages are available under 1% for the initial set period.
2. Floating interest rate: The loans with this rate are currently even lower.
Loans in Japan: Requirements for Home Loan applicants
Below are some of the requirements that need to be met by loan applicants:
- The applicant should be between the ages of 20 to 69.
- The applicant should have had at least two to three years of consistent employment in Japan.
- The applicant’s minimum yearly income should be between JPY2,000,000–5,000,000.
Other types of loan in Japan
1. Student Loan: This is the type of loan offered to college students and their families to help cover the tuition and other fees of higher education.
2. Personal Loan: This is the type of loan granted to be used for any personal expenses and don’t usually have an assigned purpose.
3. Car Loan: Also known as Auto loans, just like in sweden, these are loans used to purchase a vehicle. This type of loan is offered by a bank or by a car dealership directly and it usually has the highest interest rate compared to any other type of loan.
Types of Loan Providers
In Japan, there are three types of loan providers:
- Traditional banks.
- Specialized consumer credit companies.
- P2P lending.
Qualified foreigners to get a Loan
The following are the foreigners qualified to get a loan in Japan:
- Foreign National with a Resident Visa.
- Foreign national married to a Japanese.
- Special Adoption.
- A person born as a child of Japanese.