Information related to borrowing money from bank to purchase a real estate in Japan

In the case you hope to purchase a real estate in Japan with borrowing money from bank, you need to know some information.

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If you can borrow money from major bank ( Toshi ginko like, Mitsubishi Tokyo UFJ bank, Mizuho Bank etc ), interest rate will be lower than other money lenders ( For example Suruga bank etc.)
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There are some money lending companies that try to lend foreign nationals with high interest rate.
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Some of foreign nationals do not have enough information about borrowing money in Japan.
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And they try to abuse their lack of information.
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If you can borrow money from Toshi Ginko, interest rate will be reasonable.
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However, they are not positive about  lending money for investment.
( They are mostly prudent, conservative ).
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Interest rate of real estate investment loan

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Interest rate ( 金利 = Kinri = borrowing rate ) is about 2% to 7%.
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In differs depending on borrower and lenders, existence of collateral, length of service etc.
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If you can not borrow money below 4%, it is better for you not to borrow money to purchase a real estate.
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Because, you will be suffered from negative cash from soon.

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You can focus on your main job and prepare  enough cash.
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Floating rate ( 変動金利 = Hendou kinri ) and fixed rate ( 固定金利 = Kotei kinri ).

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Authority changes floating rate every half a year.
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However, even if floating rate is changed, the amount of your monthly repayment is not changed within 5 years.
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( Assumed you loan 120 yen from bank with interest rate of 0% and repayment period is 1 year.  Your amount of monthly repayment is 10 yen. )
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And at the time of change of repayment amount,  it can not be increased more than 25%.
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So, assumed that your monthly repayment amount is 100 yen, even if floating interest rate is increased by 100%, your monthly repayment amount is not increased to 126 yen.
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In the case of fixed interest rate, interest rate is not changed within your repayment period, for example for 25 years.
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However, fixed interest rate is mostly higher than floating rate.
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Assumed that current floating rate is 1 % and fixed interest rate is 2%.
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If you think that floating rate will not increased to over 2% during your repayment period, you can select floating interest rate.
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Criteria for examination ( Shinsa kijun = 審査基準 ) by bank.

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In the case of loan to start real estate investment, interest rate should be higher than real estate for residence.
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And examination by bank whether they shall lend money to you or not is severe.
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In the case of housing loan, if you do not repay your loan, bank can evict you by taking process in court house and you will lost your place to sleep.
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So, you will try to repay your loan by all means.
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However, in the case you make a loan to purchase real estate for investment, employee of bank think you do not have such strong motivation.

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Loan from major  bank

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In the case of Mitsubishi Tokyo UFJ bank, Mizuho bank, Mitsui sumitomo bank is negative in loan for real estate investment.
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If you have consecutive dealing with specific bank and can borrow money from them, borrowing rate will be about 3%.
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And you may need to prepare cash at least 30% of purchase price and it is difficult to apply for fixed interest rate.
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Loan from Local bank ( Chiho ginko = Chigin = 地方銀行 )

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Local bank ( Many of them have head office outside Tokyo prefecture ) is positive in real estate investment loan compared to Major bank.
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However, they have specific business area.
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For example, a bank has branch head office in Nagano prefecture, they are positive in lending money to purchase real estate in Nagano prefecture.
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Money lending facility ( = Non bank ) other than bank

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They are the most positive facility in lending money to purchase real estate for investment.
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You may be able to borrow money with easier examination.
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Interest rate will be from 2% to 6%.
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Surely, interest rate should be higher than other money lending company.
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You purchase a real estate in Tokyo with borrowing money from them, it is difficult to acquire positive cash flow.
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Loan from Government financial institution ( Seifu kei kin yu kikan = 政府系金融機関 )

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In the case you borrow money from Government financial institution ( A kind of bank their shares are owned by government, for example Nihon seisaku kin yu kouko ), interest rate will be less than 2% and you may be able to apply for fixed interest rate.
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real estate investment in Japn and loan
.There are possibilities that you can borrow money with lower interest rate compared to major bank.

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However, repayment period is shorter than other bank, it will be at most 15 years.
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So, monthly repayment amount should be increased.

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Factors that effect condition in borrowing money from bank in Japan

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Balance amount that you have already borrowed money from other bank.
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Money lending company shares your financial information with other company.
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In the case  you have loan from Bank A now, if you try to loan from Bank B, balance money for Bank A should effect condition of Bank B.
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In general, when bank or money lending company lend money to you, they take your annual salary into consideration.
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In the case of loan to purchase residence, you make loan of at maximum 7 time of your annual salary.
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And in the case of loan to purchase a real estate for investment, it will be 5 times of your annual salary.
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( Of course, it differs depending on situation )
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Situation of your health
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In the case you were hospitalized in past 3 years due to disease, you may not be able to make a loan.
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Consumer credit card
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If you have a bank card of consumer credit card ( shohisha kinyu card ), there is a possibility that you can not make a loan from bank.
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In the case you have account with loan shark ( = Sara kin ), you may receive a kind of bank card.
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If you have such card, it is one of symptom that you are suffering from lack of money.
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If you borrow money from loan shark, interest rate will be around 15%.
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Quality of your office
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For bank and other money lending organization, where you are working is importance information.
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Because, if your employer ceases to exist, you can not repay your debt.
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So, you are working in listed company or major company, or have enough number of employees and capital amount, sale amount, history of operation, it should be advantage for you.
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Duration of your service
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If you have been working in same company for more than 3 years, it will improve your trust from bank.
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Or if you have changed your office and amount of your salary has been increase, it will be good.
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Condition of work contract
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In general, part time worker, contract worker ( Koyo shain, dispatched worker ) can not make loan.
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Amount of your annual salary ( Nenshu )
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It is better that your annual salary amount is more than 5 million yen.
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Ratio of repayment amount against your salary
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Your annual repayment amount / your annual salary × 100 is less than 30% is important.
This is called Hensai futan ritsu ( 返済負担率 ).
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Your age
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In order to apply for real estate investment loan, you should be younger than 54 years old.
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Because when salaried workers get old, they will be retired from their work.
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Your own fund ( Jiko shikin = 自己資金 )
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By preparing enough self financing fund, even if you do not satisfy other requirements, you may be able to make a loan from bank.
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In general, you need to prepare at least 5% of trading price of the real estate.
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Steps to make a loan from financial institution ( Kin yu kikan ).
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① You can consult with employee of financial institution ( kin yu kikan ) and make application for making loan.
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②  You prepare necessary documents.
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Sales contract of real estate.

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Map of neighborhood.
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Certified copy of real estate register.
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Recorded map ( kozu )
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Certificate of assessed value of real estate.
( Tax office assess value of real estate and issue document that certifies value of real estate. )
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Summary of the real estate.
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Calculation sheet of cash flow.
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Estimate of necessary expense to buy the real estate.
( You clarify expense for real estate broker, registration tax, acquisition tax, fee for lawyer. )
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Drawing map of building.
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Pictures of the real estate.
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Withholding tax slip
( In this document, you can clarify amount of your salary )
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③  Financial institution starts examination for lending you money.
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④  Financial institution notifies you of decision of lending you money.
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⑤  You can conclude lease contract, contract for establishment of mortgage, life insurance ( 団体信用生命保険 ).
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⑥  Extension of loan and lawyer files registration of ownership transfer and establishment of mortgage.
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