Buying property in Japan

I promised I wouldn’t do this…

I’ve previously written about property on this site. As an investment I think there are still quite a few question marks, but depending on someone’s circumstances it may make sense to buy.

Our circumstances are now moving in that direction.

We’ve been renting a ‘mansion’ (condo) on the outskirts of Sendai and it’s very comfortable and fairly convenient. The landlord is a friend of my wife’s, and would be happy to sell it to us. It seems like we’ll be able to get a good price, and maybe even some government support in the form of recovery funds.

All in all it seems like a good move. We’re very much at the start of the process though, so I expect to learn a lot about mortgages, estate agents, taxes, and other fun things. I’ll write about our experiences here.

Right now I am thinking about how much to borrow. We could probably just get a ten-year loan and pay it off quite quickly, but after running the numbers I am not sure that would be such a good idea.

The sweet spot seems to be a fixed-rate 25-year mortgage. This would be very affordable month-to-month, give us access to the mortgage tax credit for the first ten years (1% of the outstanding loan), and leave us the option of paying it off quickly if we wanted to later.

I can get a mortgage through work, or just through a bank normally (I’m looking at Shinsei at the moment).

I am fairly confident we’d be able to rent the place out if we moved, as it’s next to a train station and in a fairly convenient area for shopping, etc.

The main reason we are buying is so that we can renovate it to our liking, but financially it seems like a fairly good deal, and there’s always the option of paying the mortgage off early.

Any comments? Advice? Things I should be aware of before starting on this journey? Share your experience or ask for advice in the RetireJapan Forum.

6 Responses

  1. When we bought our place, we found that MUFG’s rates were better than Shinsei for our case, by a significant margin. You might want to check them out.
    Another thing to keep in mind: the fees for the kanrinin and maintenance of the building increase with time and become a significant part of what you have to pay. Ask in advance for these numbers.
    Last but not least, since you know the owner, you should agree to go with the cheapest real estate agent you can find. These guys double dip by charging both the buyer and the seller, the less you have to give them, the better. Maybe since you know each other you don’t even need a real estate agent, and only have to go directly through the bank…

    1. Thanks SB! Will definitely check various banks as well as the work scheme…
      We have the maintenance fees. Not too bad at the moment, but they will still be around 60% of the mortgage!
      We using a friend who’s an estate agent (we owe her some favours and it’s a way of paying back).

  2. Best of luck! Very true that a realtor is not necessary unless advertising or research is involved – to avoid potential complications, confusion and mutual misunderstandings between buyer and seller, though, it’s highly advisable to hire a judicial scrivener (shihoshoshi), to handle all documentation, ownership transfer, confirmation of funds transfer, etc etc.

    1. Thank you Ziv! That’s a good point. We will be using a realtor this time, but I’ll definitely keep your advice in mind for future purchases.

  3. Hi RetireJapan,
    I also bought a house this year and am fresh from finding out all about it during the process.
    We also chose away from Shinsei, as their offer was not for the full amount (we were buying a used home and they evaluated the cost and only offered the land price in their loan – for the tax refund we wanted to borrow the full amount). That was a shame because their low fees looked pretty good.
    In the end, we had offers from a few places, some with ‘special’ rates which were less than the ones originally published. Some type of connection with the bank through work helped to get those rates.
    The tax refund at 1% ended up looking very good next to the 10 year fixed rate, for example, of 1.15%.
    This website was helpful initially too:
    http://kakaku.com/loan/
    Cheers

    1. Thanks CL!
      I’ll have a look at kakaku. I always check them for electronics, but didn’t think to do so for bank loans 🙂
      Yeah, that tax credit is pretty sweet.