Decided to buy a place - any tips on what to do/what NOT to do?

[cowcamo]

Hi all,

I posted at the start of the year when I was going to start looking for a place to buy. Then covid hit and I kind of put a pause on everything for a few months.
I started searching again with the help of an agent back in August, and this month came across a pre-built property that I've decided to go for.
It's smaller than I wanted, it's pre-built instead of me buying land + having a home designed, but from everything I've seen during searching, I just can't afford land+designed home unless I live 2+hrs away from work.
The place I've found is at least spacious enough, and though it's a couple million more than I was hoping to pay for (especially when you factor in all the registration fees, moving costs, and the 3% agent commission), I'm going to go for it. I like the area, I'm tired of searching, and want a place of my own.

I'm going in this weekend to sign the contract, do the loan evaluation, etc., and really just wanted to ask folks here if there's anything I should remember to ask about, anything I should remember to do or check? Basically any tips from people who have already gone through all this.

I am aware of the home loan tax deduction, and I plan to ask the agent more details about that. Apparently since I'm getting a place before year end, I'm eligible for the 3 year extension, so 13 years of tax deductions as opposed to 10 years.

I'm also going to go with SMBC for the loan. I originally applied for MUFG but they turned me down because the size of the land is too small to qualify

I'm also planning to go for the variable interest rate @ 35 years; I figure that after I max out the tax deductions over the 13 years I can start to pay off more quickly if I want/have extra money on hand, and if the variable rate goes up, I can refinance?

Would appreciate any advice/suggestions folks have. This is (for me) a huge sum of money and a big life change, so it's all scary new territory for me..

Thanks in advance! (and apologies if I'm a little slow in replying, I'll be crashing soon and out to city hall early tomorrow to start gathering the paperwork for the contract signing this coming weekend).

[captainspoke]

Hey--good luck with it all today!

[RetireJapan]

Seems like you have things under control -congratulations!

[mighty58]

You haven't clarified how deep you've already gone into discussions with your bank, but you'll need to decide about mortgage insurance (+0.2% or so to interest) and your re-payment plan (i.e. monthly or bonus-weighted). Sounds like you're already leaning variable rate but there are a lot of mixed (i.e. fixed for x years then variable) plans you can consider as well. You should also (casually) ask about refinancing fees as that may be on your horizon.

Other than that, just remember to take a drink ... it can be a long process. But it's a one-time thing, and as you're the boss, don't be shy about asking questions like a five-year-old would. I've found a useful trick in Japanese is to preface everything with "karini", allowing you to posit any sort of scenario to ask a question about, and allows the other party to respond in a (technically) unofficial manner.

Good luck!

[cowcamo]

Thanks everyone! Today was just going to the city hall to register the inkan and print out the juminhyou, inkanshomeishou, and kazeishomeishou. And going forward I shouldn't even need to go to the city hall for these documents anymore since it looks like you can print it from your local combini

@mighty58, I haven't really talked with the bank at all, they are still processing the initial application, though I am scheduled to meet with them this weekend. I will ask as many questions as I can think of, though on the monthly vs. bonus-weighted, I think I'm opting for the former, at least until the 13 year period is over. Also, it appears that you can do extra payments online anytime, without a fee: https://www.smbc.co.jp/kojin/jutaku_loa ... dex03.html

I will ask about the mixed plans though, as well as the refinancing fees. However, mixed plans look complicated to be honest, and I'm not sure I'd understand what the best option for me would be... https://www.smbc.co.jp/kojin/jutaku_loa ... xplan.html

One thing I am wondering about - apparently there is an option where you pay extra and if you get sick ("8 major illnesses"), your loan is waived. https://www.smbc.co.jp/kojin/jutaku_loa ... ippei.html
Is that the mortgage insurance you're referring to? I'm wondering if this is something worth considering... obviously I'd rather not get cancer! But wonder if it's worth it for the peace of mind. Or is there another type of mortgage insurance you're thinking of, like natural disaster protection? The area I'm considering is outside of the hazard area for flooding, and I'd already be paying earthquake and fire insurance, so wasn't really thinking about anything else on top of that.

Thanks for the tip on "karini". Hadn't heard of that before, guess that appears to be the equivalent of "hypothetically speaking..."

[mighty58]

Yes, mortgage insurance = 8 illness insurance. Personally, I got it... obviously you pay for it but that's what insurance is for. I always half joke that I'm now hoping for a mild completely curable cancer to get my mortgage paid off. Probably shouldn't tempt fate in that way though

If you're still at the pre-approved stage from your bank, I think it's definitely worth your while to get an alternative quote, at least one, but two is better. You could literally walk in off the street into your local 信用金庫, ask to speak to the mortgage tanto, and ask what they can offer. Now that's you've settled on a property, they can likely move fairly quickly in assessing your application (carry the details on the property and your personal income/documentation info with you). SMBC knowing/thinking they've got you over the rails will never be advantageous to. During your discussions with them, asking "is there anyway to bring the discount percentage down any further?" will also be worthwhile. All banks have an ostensible "base rate" (the 店頭表示金利), from which they substract an amount based on their assessment of your creditworthiness. Don't ask for a lower interest rate (they'll just point you to the 6month variable plan) ask for a greater discount percentage. Whether you get it or not, I don't know, but doesn't hurt to try, unless you're already pretty sure you've got the best discount possible (e.g. you are a seishain at a Sumitomo group company, which would likely get you the best possible discount rate from SMBC). The best way to negotiate is to have a better offer in-hand, of course. Money is fungible, so just go with the best deal you can find.

[cowcamo]

Heh - yeah, I was thinking the same (about not tempting fate when it comes to illness/cancelling of loans).

In terms of banks, I've checked out MUFG, SMBC, and Prestia. MUFG had the best rate, but rejected me because the property land area was too small

Between Prestia and SMBC, the latter has higher initial fees, but their overall rate was better, hence why I've decided to apply through them. SMBC's rates are same or better than what's listed on the Mizuho site as well, which is why I'm applying through them. But I'll see if they respond to a request for a discount... not really counting on it though.. probably just a lot of hemming and hawing before saying it's not possible..

I know past performance is not indicative of future performance, but I don't suppose there's a site that tracks interest rates from various entities over the months/years? I found this, but wondered if there were other sites that you or others knew of: https://www.ceicdata.com/en/japan/mortgage-rate

I guess my concern is that rates are so low now that it's easy to imagine them starting to go up, especially with the changes in government now that Abe is gone. I know I should not make decisions based off past performance, logically I know (especially after this year) things can change so much in a short time period, I guess I'm just overthinking a bit now that so much of my personal finances are involved..

[RetireJapan]

I got the major illness insurance for free with my loan (as I was under 40). Also had to jump through lots of hoops (apply for credit card, pay salary into account, pay utilities from the account) to get the floating interest rate as low as possible. Ended up paying 0.5%.

Personally I can't see the government allowing interest rates to rise too much, as that would make it much more expensive to pay interest on its bonds...

[cowcamo]

Hm, good to know! I'll mention those points and see if they can lower the rate a bit more, thank you!

[Tanuki]

One of our relatives is a carpenter/house builder, and here is what he told us to do before deciding on a place.

- Check the Hazard Map of the city. Usually it's available online. It will tell you, for example, how high the water may rise in case of floods. It may be 30 cm in some places, 5 m in others.

- If there are neighbors, check the neighbors : ring the door bell, tell them you are thinking about buying the land/house next to theirs, and you would like to know how they like the place, if there are any issues in the area, etc.

Other tips I found in books : You may also want to visit the area late at night and early in the morning to see if there are any problems like noise, smells, etc. It's also good to check whether there are development projects in the area, such as large roads, incineration plants, high rise buildings, etc. I know it's endless, and we all have to compromise anyway.
Congratulations and good luck with your purchase !