Housing Loan Rejected.. bank says it is due to low downpayment in application

[newbie]

I have been a reader of RetireJapan for over an year and have learned a lot by following the blog. Would like to learn from the community here about the experience I had with housing loan.

I recently saw a property and liked it. The property is in Tokyo, 23 wards. The property in question is 35 years old, a multistory mansion. The cost of the property was 40 Million. I went with a real estate agent to apply for the housing loan to SMBC Prestia.

I am in my early forties, been in Japan for 3+ years and have PR (thanks to HSFP). I was under the impression that with PR, I would be able to get 100% funding with a long repayment period and hence I applied for a loan duration of 25 years, opted for fixed interest rate and put down my downpayment as 1.5 Million.

I heard back from bank after 2 weeks that my request for loan has been rejected. When I pressed for a reason, the person said that it was because of low downpayment, which took me by surprise as neither my real estate agent nor the bank person had said anything about downpayment being low when submitting forms.

Has anyone had similar experiences where they were rejected due to a low downpayment amount despite having PR? Any pointers on how much minimum downpayment one should put in the forms would be greatly appreciated.

Also, does the loan rejection make it to your credit history in Japan. If yes, would it affect future loan applications?

[Tony]

My wife and I were rejected from Rakuten after passing the initial screening, but they refused to give me a reason when I pressed them. I have PR and am a tenured teacher, and my wife is Japanese with a large Japanese company. Our architect said it was the first time he had someone get rejected after passing the initial screening.

We ended up going with Aeon Bank.

To be honest, I'm surprised they even told you the reason for the rejection. Also sorry I don't have anything to add about a small down payment being a problem.

[RetireJapan]

Sorry to hear about the rejection.

I got a 110% loan (30 year floating) for a cheaper manshon with PR and more than three years at the same employer.

All I can suggest it maybe trying some more banks. I found the best option for us was a smaller local bank.

Good luck!

[mighty58]

I would echo the advice to shop around, which is normal behaviour when looking for a mortgage, and would try at least one big Japanese bank and at least one smaller bank or credit union (shinyo-kinko). Next time, you can try asking about loan ratios up front when applying as well, to clarify beforehand (you may not get a straight answer, but it doesn't hurt to try).

Each bank has their own internal criteria for assessing loan applications. Prestia is different from SMBC proper as it is a stand-alone rebrand of the former Citibank Japan, so they likely have their own legacy criteria that differs from your average Japanese bank, given their history of dealing with expats... e.g. 15-20 years ago several foreign banks were active in the mortgage market, and most had high down payment ratios. I wouldn't let their rejection bother you.

[concerned]

Definitely shop around
One day I was leaving a large Japan company (Was living in Kansai country area) and at the company exit there was a lady from a major bank distributing flyers for home loans, showing the lowing rates on offer. I passed by her and she did not give me one, I doubled back and asked for one, and she thought it was hilarious that I asked...

A few months later I went to another bank: SMBC bank and had no problem getting a home loan here.

[JapaneseMike]

I have been a reader of RetireJapan for over an year and have learned a lot by following the blog. Would like to learn from the community here about the experience I had with housing loan.

I recently saw a property and liked it. The property is in Tokyo, 23 wards. The property in question is 35 years old, a multistory mansion. The cost of the property was 40 Million. I went with a real estate agent to apply for the housing loan to SMBC Prestia.

I am in my early forties, been in Japan for 3+ years and have PR (thanks to HSFP). I was under the impression that with PR, I would be able to get 100% funding with a long repayment period and hence I applied for a loan duration of 25 years, opted for fixed interest rate and put down my downpayment as 1.5 Million.

I heard back from bank after 2 weeks that my request for loan has been rejected. When I pressed for a reason, the person said that it was because of low downpayment, which took me by surprise as neither my real estate agent nor the bank person had said anything about downpayment being low when submitting forms.

Has anyone had similar experiences where they were rejected due to a low downpayment amount despite having PR? Any pointers on how much minimum downpayment one should put in the forms would be greatly appreciated.

Also, does the loan rejection make it to your credit history in Japan. If yes, would it affect future loan applications?

In fairness, despite having PR, you've only been here 3 years right? That means you've got less history to go on. Most of the other folks with PR would have 10+ years in Japan so they have long history records of paying tax, paying pension, etc. After 3 years. banks may be sceptical?

Given you suggested 1.5mm out of 40mm., that's less than 5% down. While shopping around is definitely the way to go, it might not hurt to try and find the 'floor' that Prestia has somehow determined for you by raising your deposit amount and re-applying. Try putting it 4mm or less to understand if 10% or somewhere else for their threshold to be a successful application.

[suntori]

It is also dependent on the property itself.
If it is a new property, in my experience, it is easier to get the 100% mortgage loan.
For older properties, the bank will need to assess it, and if the assessed value is lower than the mortgage amount you requested, you would have to put the difference as a down payment. This could also be translated as "low down payment", although it is only applicable to the specific property, not to you.

But as others said, it depends on each bank, some are strict with old properties and some are more relaxed.

[sugus]

Nothing to worry about, like others said, better to shop around and see other banks.

I had PR when I applied for a home mortgage, and my bank wouldn't approve it because they thought the value of the property was lower from what I was wanting to borrow. Ended up getting my mortgage with another bank.

[Tkydon]

I think Prestia is particularly conservative, and would require maybe a 20% Down payment for their margin of safety.

Japanese Accounting depreciates the value of the structure, and banks probably take the residual accounting value into account for Older properties.

Timber framed houses are depreciated over 22 years
Steel Reinforced Concrete Structures are depreciated over 47 years

So an older structure has less remaining economic life, and so may require a higher down payment and / or a shorter mortgage term.

I second the vote to try Aeon Bank.

[beanhead]

I got rejected by one branch of one of the 'mega banks' and accepted by another branch a few miles away.
So, don't give up!
Another thumbs up for Aeon Bank here, and also try your local/regional bank.