JP mortgage for real estate abroad

[Yokohama]

I remember seeing a thread about getting a mortgage in Japan for buying real estate abroad, but I cannot find it. Does anybody have experience with securing a loan in Japan for buying property abroad? What are common interest rates for these types of loans? Any requirements that need to be met? Any bank recommendations?

The reason I'm looking into this is I would like to buy a house for my mother.

[Tkydon]

If you borrow Yen today and buy a property overseas, you will probably need to pay a down payment of 30%

Say for illustration (round numbers) you buy a property in the US for $1,000,000, pay a down payment of $300,000 and finance $700,000

You Borrow Yen to cover the $700,000 x 138.67 = Y97,069,000

Your Equity in the property is worth around Y41,600,000

But, say the Exchange rate moves from 13x to 120...

The value of the property in Yen falls from $1,000,000 x 138.67 = Y138,670,000
down to $1,000,000 x 120 = Y120,000,000
The Bank's share to maintain the Loan to Value Ratio of 70% has fallen from Y97,069,000
down to Y120,000,000 x 70% = Y84,000,000

The Bank will then ask you to immediately pay the difference Y97,069,000 - Y84,000,000 = Y13,069,000 or about $109,000 to the bank to maintain the Loan to Value Ratio for the bank. This is a Margin Call.

Alternatively if you only borrowed Y80,000,000 to be on the safe side, you would have to pay a down-payment of more than
1 - Y80,000,000 / Y138,670,000 = 42.3%
to protect you from a Yen Exchange Rate change to Y120 to the USD...


If the property was say $300,000, you can divide the numbers above by 10 and multiply by 3...
The Margin Call would be Y3,920,700... or about $32,700...


This is too risky, and is not recommended at this time with the very weak Yen. You would only want to do this when the Yen was very strong, and you might still get hit with short term fluctuations in the exchange rate.

[Yokohama]

Thank you for the example. I have the money to buy a property in cash, so any margin calls I can handle. However, I'm very interested in what the actual interest rate would be. If that would be less than 3% than I would prefer to borrow compared to liquidating current investments.

I agree that the yen is weak, but I'm not in a hurry. I mostly would like to know if these loans exist and what the interest rate would roughly be.

[Wales4rugbyWC23]

Before the Lehman crash, there used to be some Australian banks in Japan who were lending to Japanese residents to buy in a foreign country. As the above poster commented, it really is best to borrow in the currency you are buying in. Where do you want to buy?

[Yokohama]

Planning to buy in South Korea. Interest rates for mortgages are a lot higher in Korea than in Japan.