Releasing Equity from land, "Re"mortgaging against land owned

[Seasider4374]

I own outright, a fully-paid for, plot of land in Japan probably worth circa 20m yen. When purchasing the land many years' ago the plan was to build on it but, for various life reasons, that is now not a favoured option and so I am now just essentially "land-banking" the plot so that it can be (gifted to/inherited by) my son anywhere between 20-40 (50?) years' time from now.

I'm just interested in finding out if there are ways of making my land more financially liquid than it currently is for me during that period.

Most "free loans" that banks offer only seem to loan out a maximum of around 30-40% of last years' income total, at rates of around 8-14%.

Is there any loan available where the value of land owned can be used as collateral, rather than just my last year's income figure?

Ideally I'd like a scheme where I could essentially sell the land at market value to a bank, whilst agreeing to buy it back from the bank on the same day under one of their home loan mortgages with rates around the 1-3% mark. Giving me an instant influx of cash, and favourable loan rates enabling me to buy back "my" land over the next 20 years or so...

[Deep Blue]

I also looked into releasing equity from my Japanese house a few years ago, looking to borrow 50% of the market value on a fully owned, unmortgaged property. Such loans would be readily available in the UK, but nobody at the bank I spoke to seemed to be able to comprehend this idea. If I was not buying it from someone else, they wouldn't raise a mortgage against it.

Maybe something was lost in translation but in the end I gave up and secured the funds I needed elsewhere.

Hope you have better luck1

[Tkydon]

I think the problem may be that the land has no cashflow, and Japanese banks don't want to be stuck with land they may not be able to off-load,

How about converting it to a pay car park? Or is it not in such a location?

I wonder if the likes of UoB Bank in Singapore might be a bit more flexible ???

[TokyoWart]

I participate in the opposite side of this transaction in the US because it is so profitable for "bank". We (my fellow investors in the private lending fund) hold the land while a developer pays a very substantial interest rate (above 10%) as they develop the land, usually for multifamily housing. The arrangement works for the developer only because they get the loan more quickly and completely from me and my fellow investors than through the banking process (the bank charges an upfront fee and also requires a substantial fraction of the loan is kept in their very low interest bank account with tranches released as development progresses). The developer is incentivized to complete construction as quickly as possible because every day costs them so much in interest. Based on my experience it is difficult for me to see how you can get a safe return high enough to cover the interest you would be paying the bank, even setting aside the problem that the financial infrastructure in Japan is much more conservative than in the US.

[Seasider4374]

I completely understand your point re

I think the problem may be that the land has no cashflow, and Japanese banks don't want to be stuck with land they may not be able to off-load,

Though if I were just to sell the land to a Japanese (or foreigner with PR) and that buyer went to get a loan they'd get one straight away. The cashflow potential of the land would never be considered in judging to award a loan or not...

Just one of those things to file under being a quirk of living in Japan I guess...

[Deep Blue]

Yes, you’re spot on. If you were buying the land from another party, you’d be able to take a loan easily.

But “buying it from yourself”, seems to be a blind spot here.

[zeroshiki]

I am unfamiliar with the systems in place so I cannot comment on how to do this but one thing I will add is that based on all the research I've done regarding mortgages, banks are quite generous with interest rates and evaluation ONLY for primary home mortgages. If you do not actually live in the place, they become incredibly strict and the rates become quite high. Not surprised they wouldn't allow a mortgage to yourself in this case.

[Tkydon]

I am unfamiliar with the systems in place so I cannot comment on how to do this but one thing I will add is that based on all the research I've done regarding mortgages, banks are quite generous with interest rates and evaluation ONLY for primary home mortgages. If you do not actually live in the place, they become incredibly strict and the rates become quite high. Not surprised they wouldn't allow a mortgage to yourself in this case.

Especially for rental properties, second houses, etc., or if you do not qualify for a Home Loan for your Primary Residence, (non PR, etc.), then they treat it as a commercial loan, and terms are typically much less favourable; 30% Down and 3% - 4% ish, depending on duration terms, and depending on the bank....