Saving for a loan down payment (5 years)

[pfdsa]

Hi everyone.

Not sure if this is correct sub, but since it is related to real estate will ask here.

Me and my wife are going to start saving for a down payment for a house, which we are planning on buying around 2026.
I’m aware that some people managed to get a 100% loan (or even more than that), but since our income is pretty low (combined annual income around 5,000,000 yen), I think that it is easier to just save for a downpayment. Saying this because currently don’t have PR, which I think that would make it even more difficult for me to get the loan. In 5 years I’ll probably have PR, but if for some reason I don’t manage to get it, the loan will need to be on my wife’s name, and her income is the lowest.
Anyway, if we do manage to get a 100% loan I can use the down payment money to pay the extra fees or/and invest the rest.

Since we both are going to save an established monthly amount during a 5 year period, started wondering if it is a good idea to put that money in a index fund like the emaxis slim on a taxable account (maybe bonds instead of index fund?), or just save that money in a regular bank account (maybe a savings account?).

More details:
-Our budget for the property (used) is around 10,000,000 to 15,000,000 yen (including all the extra fees, etc);
-Currently have an emergency fund of 6 months;
-Currently investing on Tsumitate Nisa, and my wife is thinking about starting doing the same;
-Not investing on my iDeCo because don’t know if will live in here forever, but if we do buy the house may as well start investing.

Any opinions?

[EmaxisSlim Cultist]

Hi everyone.

Not sure if this is correct sub, but since it is related to real estate will ask here.

Me and my wife are going to start saving for a down payment for a house, which we are planning on buying around 2026.
I’m aware that some people managed to get a 100% loan (or even more than that), but since our income is pretty low (combined annual income around 5,000,000 yen), I think that it is easier to just save for a downpayment.

Since we both are going to save an established monthly amount during a 5 year period, started wondering if it is a good idea to put that money in a index fund like the emaxis slim on a taxable account (maybe bonds instead of index fund?), or just save that money in a regular bank account (maybe a savings account?).

Any opinions?

5 years is long enough to consider doing something with it.

I would consider something like 30% equities / 70 % cash.

Alternatively, you can consider starting risky and slowly easing the risk
100% equities Year 1
80/20 Year 2,
60/40 Year 3,
40/80 Year 4,
20/80 Year 5

Finally, if you are not worried about currency risk you can often buy US Treasuries on Rakuten/Monex and SBI.

[beanhead]

Standard savings in the bank would be the default response, I think, if you need this money quite soon.

Your eMaxis Slim bond fund is not such a bad idea, however. I drip a little bit into that developed country bond fund every now and then.
My lowest purchase price in April was 11,518. It now costs 11,870. Rakuten tells me my return has been 1.23% over the past 9 or 10 months. Not much of a return, but slightly better than 0 with low risk. I think of it as being equivalent to cash. The return is small, so I don't care about paying a small amount of tax if I want to sell some to buy something else.

Regarding the 100% loan, although it is possible, I think it would limit your options. So having a decent deposit is a good idea. I got a loan a few years ago and didn't want to put a large deposit down. I had to justify it to the bank manager as they were slightly concerned that I could not save. I shared my investment portfolio with them to show them that I was saving, just not in the 0% interest bank account.

[RetireJapan]

If you are saving for something with a limited time scale, I would just put the money in the bank (maybe in a time-limited account with slightly higher interest).

But do look into getting a 100% loan. It may well be possible, and then you could invest the money you would have used for the deposit.

[fools_gold]

I've heard of some people investing their deposit and doing quite well, but the general advice I've seen is to put it in a savings account if you need money in the short term. One option would be to just invest a proportion of the money to reduce the risk.

Personally, I chose to max out my loan rather than save up for a big deposit. One reason was the ridiculously low interest rates. The other reason was that I didn't want to chuck away my money paying rent while I was also saving up for a deposit.

I think banks lend up to just over 5x income.

[taneandy]

I'm also not sure if I follow the logic that having a moderate to low income means that you should avoid a 100% loan.
So long as the overall cost of the property is not excessive and you can cover the monthly repayments with you current income, taking a larger loan would give you more flexibility and the possibility of better investment returns.

Regardless of whether you take a 100% loan or not, you will need to have some cash on hand for various associated expenses such as contract fees, furnishings, etc.
I think it's a good idea to have that saved in a standard bank account.

I don't known how much you are budgeting for buying a property, but that may mean aiming to have 6-12 months worth of expenses as an emergency fund and then a similar amount again for the initial costs of purchasing a property.
Anything extra could then go towards maxing out tax advantaged investment accounts such as NISA and IDECO.

[pfdsa]

Thank you all for the opinions so far. Very helpful.
After seeing the comments added more details to the original post to explain the situation better.

Looks that, so far, the consensus is to either invest conservatively, or just keep the money safe in the bank.
Been researching a bit, and like some of you said, currently the interest rates are very low, but I have no idea if they will still be this low 5 years later...If we do manage to get a 100% loan 5 years later, maybe I can use some of the down payment money any extra fees, furnishings, etc, and then invest the rest. Better safe than sorry I guess.

Any other opinions?

By the way, when applying for a loan the bank considers both our income, or just the income of the person that is applying? Is it possible to make a loan in the name of 2 people?

[fools_gold]

By the way, when applying for a loan the bank considers both our income, or just the income of the person that is applying? Is it possible to make a loan on the name of 2 people?

I haven't done it personally, but it is possible. I guess you'd both have to be screened which might make it more difficult. Search for 共働き世帯の住宅ローン

[Gab]

Yes it is quite normal to get a pair loan in Japan.

By the way, when applying for a loan the bank considers both our income, or just the income of the person that is applying? Is it possible to make a loan in the name of 2 people?

[Ori]

(combined annual income around 5,000,000 yen)

-Our budget for the property (used) is around 10,000,000 to 15,000,000 yen (including all the extra fees, etc);

You should have no problems getting 100% or even more than 100% (misc expenses, reform etc) even now, provided you have stable jobs. Banks seem to have limit of loan amount = income x (5~8), and you are well below the limit.

Not having a PR is a bigger problem, though. But if you think there is a high possibility of you not getting it anytime soon, you better try to get loan now instead of wasting money on rent. I've heard Prestia (and Suruga maybe?) is ok with no PR, though the rate will be higher than the regular one.