Am I delusional about this home loan?

[beanhead]

Did you look at Aeon Bank? They are pretty competitive usually.
https://www.aeonbank.co.jp/housing_loan/
They are saying + 0.3% for coverage of 8 illnesses, it seems.

[mighty58]

We initially wanted to find a used house too, but as you fairly noted most of them were shitboxes, and those which weren't were failing other requirements like location, school district etc. You must have been very lucky to find the house you like.
And actually, buying decent used house wasn't much cheaper than building a new one, considering bigger commission, renovation costs and less tax benefits (not sure about the last one, though). Of course, it also depends on the choice of a house maker, because used house from someone like Sweden house could easily cost more than a new custom house from local builder, who also builds passive(ish) houses.

Definitely. Every house is different, but decent used houses in decent locations actually do retain a decent amount of value, even here in Japan, despite having depreciated (on paper) significantly. And it goes without saying that with new builds there's a HUGE range in the price you can pay, not just in building and labour costs, but also factoring in all of the materials selected and whether you get high or low grades of things like flooring or kitchens or bathrooms. I found when selecting materials for my renovation that, as it's my home and I expect it to be so for many years, I would naturally gravitate towards the better quality (and more expensive) materials and grades. There is a real and tangible difference in quality, but you will end up paying for it.

About the tax benefits of new builds... as my house was exactly 20 years old I did miss out on those almost completely, only the smaller portion of my loan that I used for renovations was eligible for any tax reductions. Did those lost benefits outweighed the cost of building new? ... for me it didn't reach that level, and so buying used still gave me more bang for the buck.

However, your comment about insurance made me doubting this loan again. The thing is, although I'm going to be a sole borrower, we are going to pay it off together with my spouse, who cannot (I think) be a co-borrower due to an unstable income, work history, employment type and such. And that means that only I am going to be insured. So if something happens with my spouse and we will have to pay off the loan only from my income, it will much tougher (close to 30% of my net income, not to mention that I will have to cover all other expenses by myself as well). As a countermeasure, my spouse could get a life insurance, I guess...

By the way, your loan conditions sounds very good. You say you've got 7大 for only +0.2%, while Rakuten, which is my top runner at the moment, offers only 3大 for the same +0.2%. Do you mind me asking were and what kind of loan did you get?

I joke sometimes that I wouldn't mind some relatively mild form of cancer that's caught very early and thus very treatable... taking care of the mortgage in one fell swoop. I don't want to tempt fate though. Very skewed incentives .
Anyway, I went with MUFG for the 7大 insurance at +0.2%. At the time I got my mortgage (2019) the best rate I could find for a fixed 35-yr term was 1.29% and then +0.2% for the insurance makes 1.49%. That probably sounds crazy high, but at the time I wanted to lock in the rate for peace of mind. Nowadays, I'm wondering whether I would've been better off with an initial-10yr or 15yr fixed rate and then floating after that... given the ceiling limitations on annual rate hikes, there is some protection in the event of huge interest rate increases. Maybe I'll get around to refinancing one day...

[JapaneseMike]

We initially wanted to find a used house too, but as you fairly noted most of them were shitboxes, and those which weren't were failing other requirements like location, school district etc. You must have been very lucky to find the house you like.
And actually, buying decent used house wasn't much cheaper than building a new one, considering bigger commission, renovation costs and less tax benefits (not sure about the last one, though). Of course, it also depends on the choice of a house maker, because used house from someone like Sweden house could easily cost more than a new custom house from local builder, who also builds passive(ish) houses.

Definitely. Every house is different, but decent used houses in decent locations actually do retain a decent amount of value, even here in Japan, despite having depreciated (on paper) significantly. And it goes without saying that with new builds there's a HUGE range in the price you can pay, not just in building and labour costs, but also factoring in all of the materials selected and whether you get high or low grades of things like flooring or kitchens or bathrooms. I found when selecting materials for my renovation that, as it's my home and I expect it to be so for many years, I would naturally gravitate towards the better quality (and more expensive) materials and grades. There is a real and tangible difference in quality, but you will end up paying for it.

About the tax benefits of new builds... as my house was exactly 20 years old I did miss out on those almost completely, only the smaller portion of my loan that I used for renovations was eligible for any tax reductions. Did those lost benefits outweighed the cost of building new? ... for me it didn't reach that level, and so buying used still gave me more bang for the buck.

However, your comment about insurance made me doubting this loan again. The thing is, although I'm going to be a sole borrower, we are going to pay it off together with my spouse, who cannot (I think) be a co-borrower due to an unstable income, work history, employment type and such. And that means that only I am going to be insured. So if something happens with my spouse and we will have to pay off the loan only from my income, it will much tougher (close to 30% of my net income, not to mention that I will have to cover all other expenses by myself as well). As a countermeasure, my spouse could get a life insurance, I guess...

By the way, your loan conditions sounds very good. You say you've got 7大 for only +0.2%, while Rakuten, which is my top runner at the moment, offers only 3大 for the same +0.2%. Do you mind me asking were and what kind of loan did you get?

I joke sometimes that I wouldn't mind some relatively mild form of cancer that's caught very early and thus very treatable... taking care of the mortgage in one fell swoop. I don't want to tempt fate though. Very skewed incentives .
Anyway, I went with MUFG for the 7大 insurance at +0.2%. At the time I got my mortgage (2019) the best rate I could find for a fixed 35-yr term was 1.29% and then +0.2% for the insurance makes 1.49%. That probably sounds crazy high, but at the time I wanted to lock in the rate for peace of mind. Nowadays, I'm wondering whether I would've been better off with an initial-10yr or 15yr fixed rate and then floating after that... given the ceiling limitations on annual rate hikes, there is some protection in the event of huge interest rate increases. Maybe I'll get around to refinancing one day...

The extra insurance thing is a very interesting option. Honestly, it feels like you're paying for an extended warranty, which is usually a terrible idea, but this isn't a PC, this is a house.

Might just do a poll to see who is paying for it and who isn't.....

[RetireJapan]

The extra insurance thing is a very interesting option. Honestly, it feels like you're paying for an extended warranty, which is usually a terrible idea, but this isn't a PC, this is a house.

Might just do a poll to see who is paying for it and who isn't.....

I got cancer and life insurance included for free, as I was (just) under 40 at the time I took out the loan.

Completely understand the desire to get some trivial little melanoma that is easy to cure but qualifies to zero out the mortgage, but don't want to temp fate too much...

[captainspoke]

I'm not sure about home loan 'cancer' policies, but some otherwise not-home-loan-related cancer policies that pay out on diagnosis and treatment have small print that says something like it has to be more serious than stage I. At least words to that effect.

[JapaneseMike]

I'm not sure about home loan 'cancer' policies, but some otherwise not-home-loan-related cancer policies that pay out on diagnosis and treatment have small print that says something like it has to be more serious than stage I. At least words to that effect.

This makes sense, I can't imagine the industry would do very well if it pays out for non-life threatening situations

[zeroshiki]

I think I read about how SBI offers 7dai coverage on their home loans for free but if you read the fine print, one of the requirements is you be unable to work for 180 days out of a year.

[mighty58]

MUFG's policy only rules out melanoma/skin cancer, and they have waiting period of 90 days after diagnosis before payout happens, but otherwise there don't seem to be any other conditions. Regarding the interest, MUFG's "window" rate is 0.3%, but if you qualify for rate reductions it can go down (similar to the interest rates themselves).

[Ori]

Anyway, I went with MUFG for the 7大 insurance at +0.2%. At the time I got my mortgage (2019) the best rate I could find for a fixed 35-yr term was 1.29% and then +0.2% for the insurance makes 1.49%. That probably sounds crazy high, but at the time I wanted to lock in the rate for peace of mind. Nowadays, I'm wondering whether I would've been better off with an initial-10yr or 15yr fixed rate and then floating after that... given the ceiling limitations on annual rate hikes, there is some protection in the event of huge interest rate increases. Maybe I'll get around to refinancing one day...

Actually, that's a good deal even now.
I've just checked current MUFG rates, and it's 1.60% for 35 years. And 7大 is +0.3%.
With exception of couple of banks, the best fixed rates for 35 yrs loan are offered by Flat 35 plan, and it's 1.25-1.28%.

Wrt to variable rate, there was a link to an article somewhere on this forum, which was explaining that this protection against rate spikes is actually bullshit. You will still have to pay the difference, so you loan duration will simply increase to compensate for the lower monthly payments. Banks are not giving out money for free

[Ori]

I'm also wondering, what's better - to buy a life insurance separately or as a part of a loan (the above mentioned +0.2%~)?
On one side, cost of a separate insurance raises with the age, on other hand the payout stays the same, while with the "built-in" insurance it's the opposite - the cost stays the same, while payout sort of decreases, because the remaining principal is decreasing.

Has anyone compared this two options?