Am I delusional about this home loan?

[JapaneseMike]

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?

It's a good point actually, and worth looking into - but one clarification is that the cost for the mortgage insurance doesn't stay the same though. It's +0.2% (or whatever), but that's applied to your outstanding mortgage balance.

So additional annual 0.2% on 40mil outstanding vs 10mil outstanding is 80,000 vs 20,000 right?

[Ori]

It's a good point actually, and worth looking into - but one clarification is that the cost for the mortgage insurance doesn't stay the same though. It's +0.2% (or whatever), but that's applied to your outstanding mortgage balance.

So additional annual 0.2% on 40mil outstanding vs 10mil outstanding is 80,000 vs 20,000 right?

Depends on the kind of loan, I guess.
In case of 元利均等返済, interest is paid off first, and monthly payments stay the same during the whole loan duration.
In case of 元金均等返済, both principal and interest are paid off simultaneously (if I understood correctly), so payments decrease over time.
In the latter case, we can say that mortgage insurance decreases overtime. However it seems, that many (most?) banks allow only 元利均等返済.
https://www.rakuten-bank.co.jp/home-loa ... ethod.html

[JapaneseMike]

It's a good point actually, and worth looking into - but one clarification is that the cost for the mortgage insurance doesn't stay the same though. It's +0.2% (or whatever), but that's applied to your outstanding mortgage balance.

So additional annual 0.2% on 40mil outstanding vs 10mil outstanding is 80,000 vs 20,000 right?

Depends on the kind of loan, I guess.
In case of 元利均等返済, interest is paid off first, and monthly payments stay the same during the whole loan duration.
In case of 元金均等返済, both principal and interest are paid off simultaneously (if I understood correctly), so payments decrease over time.
In the latter case, we can say that mortgage insurance decreases overtime. However it seems, that many (most?) banks allow only 元利均等返済.
https://www.rakuten-bank.co.jp/home-loa ... ethod.html

I hadn't considered that point, but logically unless you're paying interest only mortgage (they used to have these in US/Europe before the crash in 2008, not sure if they still exist) then your principal will decrease over the life time of the mortgage so you can eventually pay the whole thing off

So, this is just a back of the envelope calculation and it's late, so if I've made an incorrect assumptions, please correct me.

Using the previous 40mmilloan example, and let's assume a 1% interest rate mortgage, plus additional 0.2% for the insurance/cover.

So after month one, you've got 1.2% interest on 40mil yen which is 480,000 / 12 (since only 1 month worth of interest) so you've only got 40,000 interest to pay in total. If your payment is 120,000 a month you're paying off 80,000 worth of principal. Now, you're paying the same amount every month, so next month you'll have a principal of 39.920,000 which will accrue 479,040 / 12 = 39,920, meaning you'll be paying off 80,080 worth of principal. So, fast forward 30 years and your interest (and therefore insurance premiums) will continue to drop.

[Tony]

One thing to be careful of with home loans are the handling fees. Some banks, like Aeon, offer two ways to pay for the handling fees 1) 2.2% of the total amount loaned (with a minimum fee of 220,000) or 2) or a flat fee of 110,000 and a 0.2% increase in interest. We plan to pay off the loan as fast as possible after the 13-year tax break ends, so we opted for option 2, as we also didn't have the cash for the fee upfront.

[Ori]

So, fast forward 30 years and your interest (and therefore insurance premiums) will continue to drop.

Yes, you are right. But without running the actual numbers it is difficult to say which option is better. Same as with fees, which Tony has mentioned.
I hope I will get to it one of these days...

[Jansen]

Be aware that the older you get, the harder it becomes to get a loan (and eventually, rent).

My bank wouldn't give me a 35 year mortgage because I was 40 as a business owner, they were worried I might not have 'stable income' past 70, despite the fact that my current assets were more than enough to cover the total costs twice over. The reasons are whack when a salaryman making 6m is considered more trustworthy than a property owning business owner making over 10m.

We eventually settled on maxi 30m over 30 years with 5m out of pocket at 1.15%.
It's a confusing term, but if my total cost was 28m, they would only loan me 23m. If it was 40m, they would only give me 30m.

[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%~)?

Answering my own question, a separate life insurance is way more expensive.

Also a quick update for all concerned
The deal with the land fell through because of the realtor being an a-hole (I think he had a "better" buyer lined up, so he kind of bullied us out of the deal). Honestly, I was a little relieved when that happened.
Shortly after that we found a 15 year old house in the same area which fitted our requirements (to an extent), so currently we are going through a purchase process.
I cannot say that I'm completely happy, because the house is a former tateuri, while I've already gotten used to a thought that we are building a good quality house customized to our needs.
On other hand, it is in a good shape, spacious enough and has a layout exactly as we wanted. And it is much cheaper
We could afford something better/more expensive while still staying in our comfort zone, but who knows when we will find it, and we don't have all the time in the world.

[Ori]

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.

About the insurance. As I've found out after applying to a lot of banks, a big catch with cheap net banks like au, paypay and the like, is that the requirment for the insurance to kick in (not only cancer, but the 7, 11-dai or all illnesses), is that you have to stay in hospital for 6 month consecutively, while the average hospital stay for the illnesses in question is 30 days. So basically, this insurance is an expensive scam.

[captainspoke]

... we found a 15 year old house in the same area which fitted our requirements (to an extent), so currently we are going through a purchase process. ...

Congratulations!

[Ori]

Congratulations!

Thanks!