RetireJapan

DragonAsh wrote: ↑Tue Jan 23, 2018 2:40 am

sutebayashi wrote: ↑Fri Jan 12, 2018 2:48 pm Another book I remember reading before buying was 家を買ったほうが得！ by a 藤川太.
As I recall, the take away was that from a financial perspective, renting is usually better.

That would be a counter-intuitive take-away given the title of the book!

Yes, it was a teaser title. I found the correct title, if anyone wants to try find it at the local library. I remember finding it informative.

https://www.amazon.co.jp/gp/aw/d/402273 ... ref=plSrch

RetireJapan wrote: ↑Tue Jan 23, 2018 3:22 am For people buying an eligible property, the tax deduction for the first ten years means it might be worth borrowing as much as possible (with smaller deposit) for as long as possible (so the monthly payments are smaller) in order to maximise the tax deduction.

I beieve this is capped at 200,000 Yen per year, at least it is for my case (I bought second hand 27M).
Also if you need to re-locate due to work for a while , and rent out your house to someone else while you are away, you cannot claim this deduction while you are away

concerned wrote: ↑Sat Mar 03, 2018 8:28 am I beieve this is capped at 200,000 Yen per year, at least it is for my case (I bought second hand 27M).
Also if you need to re-locate due to work for a while , and rent out your house to someone else while you are away, you cannot claim this deduction while you are away

Interesting about the cap. I was not aware of that.

Also be aware that many residential mortgages do not allow you to rent the property out, and this being discovered could result in the bank demanding immediate repayment of the loan in full or refinancing with a buy to let mortgage.

"Also be aware that many residential mortgages do not allow you to rent the property out, and this being discovered could result in the bank demanding immediate repayment of the loan in full or refinancing with a buy to let mortgage."

Unfortunately I will need to move for work myself... and was concerned about this.
I checked with the agent who sold me the house, he is a pretty ok guy I trust him to a degree... and he mentioned this would not apply in my case, he recommended just notify the bank I was moving due to work, and that I would be back to live in the house in the future. He mentioned there was no need to tell them I would be renting it out in the meantime....

When I was buying the house last year, I did mention there was the possibly I would move, and I raised this issue with him also back then, and he mentioned it woulld not be a problem...

Then again this is a guy who is trying to make a sale.... What you say does make sense though, as everyone would do this; use cheap loans for buy to let....

I guess I will see what wil happen... if I am away from here too long the bank could find issue....

concerned wrote: ↑Sat Mar 03, 2018 8:28 am I beieve this is capped at 200,000 Yen per year, at least it is for my case (I bought second hand 27M).

It depends on the circumstances- for a new house with all the bells and whistles, the cap is 500,000 - e.g. 1% of a 50,000,000 yen loan balance.

In a sense it is like getting the consumption tax you paid when buying the house, back over ten years. But only if you have a mortgage.

concerned wrote: ↑Sun Mar 04, 2018 2:31 am "Also be aware that many residential mortgages do not allow you to rent the property out, and this being discovered could result in the bank demanding immediate repayment of the loan in full or refinancing with a buy to let mortgage."

Unfortunately I will need to move for work myself... and was concerned about this.
I checked with the agent who sold me the house, he is a pretty ok guy I trust him to a degree... and he mentioned this would not apply in my case, he recommended just notify the bank I was moving due to work, and that I would be back to live in the house in the future. He mentioned there was no need to tell them I would be renting it out in the meantime....

When I was buying the house last year, I did mention there was the possibly I would move, and I raised this issue with him also back then, and he mentioned it woulld not be a problem...

Then again this is a guy who is trying to make a sale.... What you say does make sense though, as everyone would do this; use cheap loans for buy to let....

I guess I will see what wil happen... if I am away from here too long the bank could find issue....

Do you have anything in writing? I think the fact that he's telling you not to inform the bank says it all...

"Do you have anything in writing? I think the fact that he's telling you not to inform the bank says it all.."

I do not have anything in writing... Hmm you are correct, not a good sign...

Wow, somehow I was not notified of new replies and just read all these now. Our home(or mansion depending on who to ask) search is heating up but so far have not found a place that checks most of our requirements. In the meantime I am still figuring out home much I can afford.

Regarding downpayments, the low interest rates in Japan tells me to make as low a downpayment as possible. This is the exact opposite of how I have grown to view these things coming from a country with a very high interest rate. (If you tell me that I will have to pay 2% interest for 35 years, I would buy you a cake and kiss you). So I want to be cautious and see if this is the correct way to view it? I mean if I had the money, I might as well out it in ANY safe investment that gives more than 2% returns right? Am I missing something?

crew wrote: ↑Fri Mar 16, 2018 6:06 am Wow, somehow I was not notified of new replies and just read all these now. Our home(or mansion depending on who to ask) search is heating up but so far have not found a place that checks most of our requirements. In the meantime I am still figuring out home much I can afford.

Regarding downpayments, the low interest rates in Japan tells me to make as low a downpayment as possible. This is the exact opposite of how I have grown to view these things coming from a country with a very high interest rate. (If you tell me that I will have to pay 2% interest for 35 years, I would buy you a cake and kiss you). So I want to be cautious and see if this is the correct way to view it? I mean if I had the money, I might as well out it in ANY safe investment that gives more than 2% returns right? Am I missing something?

The other factor is the tax rebate/refund/deduction on mortgages. You can get 1% back in taxes a year for ten years up to a 40m yen loan (50m for very well built/certified homes). For some people it makes sense to take full advantage of this and they pay off the loan after this.

As for borrowing and investing instead of using cash, I'm sure DragonAsh will jump in here soon

I think you could argue both sides, so it's down to individual preference.

RetireJapan wrote: ↑Fri Mar 16, 2018 10:34 am As for borrowing and investing instead of using cash, I'm sure DragonAsh will jump in here soon

a ha ha - he knows me too well.

So I want to be cautious and see if this is the correct way to view it? I mean if I had the money, I might as well out it in ANY safe investment that gives more than 2% returns right?

Sure - please point out all these SAFE investments guaranteed to pay out more than 2% in real terms of which you speak. You can't, because there aren't any. Sure, long-term Treasuries are paying more than 2% now, and you could gain more on the exchange rate - or you could lose far, far more. You're just swapping out market risk for forex risk.

Don't be enticed by the 'low interest OMG FREE MONEY" bit. Everything is always relative.

In the US, you can get a 20-30yr fixed rate mortgage for 4-5%, while 20-30yr Treasuries are yielding around 3%.
In Japan, you can get a 20-year loan for 1-2%, while 20-year JGBs yield 0.5%, and 10-years are at 0.05% (!).
20 years ago in the US, a 15-year fixed mortgage was 7-8%, while 10yr Treasuries were yielding 6-7%.

People say 'oh, I'd love to take out as much debt as I can at 2%' wouldn't say that at 4-5% or 6-7%...but relatively speaking, there's no difference. Rates are relative.

"But I can make more than 1-2% in the stock market". Says who? Sure, Japan equities have had a great 4-5 years, and the US has had a really good 8-9 years...but remember, any rise in the market is simply realizing future returns early. In 1983, the Nikkei was around 7000. In 2003, the Nikkei was around 7000. In 2009, the Nikkei was around...7000. Don't think it can go back down to 7,000 again? The most dangerous words in finance: "This time is different".

Adjusted for inflation, the Dow Jones Industrial Average was at the same level in 2009 as it was in 1999.

Oh, and there have been multiple big market crashes that could have wiped out 30%+ or more of your investments, with no guarantee you'll get nine-year bull market next time (there's a reason it's never happened before).

And that's assuming you are the rare steely-nerved investor that doesn't freak out when the market falls 20%, sells everything and sits in cash.

We've now had multiple years of nothing but steady growth in equities - that, to me, is a big red flag.

And don't even get me started on the '1% back in taxes'. Firstly, I challenge you to find a millionaire that claims they got rich by claiming 1% back on their mortgage payment. Millionaires are millionaires because they don't do debt.

To get the max benefit on that 40mn loan for the full 10 years, you have to have a loan balance of over 40mn for the entire 10 years. Taking out 45mn for 30 years means you now pay 55mn! Sure, for the first 10 of that you can deduct around Y35,000 from your Y150,000 payment. Over 10 years, you 'save' 4mn. Congratulations, you still have **20 more years** at Y150,000.

Pay as big of a down payment as you can, get a 15-year fixed rate mortgage with the payment no more than 20-25% of your monthly salary, and make sure you can make additional repayments at no extra fee.

Ignore the 1% - obviously take advantage of it, but do NOT let that entice you into a 'no down payment/30+ year' mortgage.
That's a recipe for buying way too much home and being too far in debt.

Have you *ever* heard anyone say, "you know, the problem was we just didn't borrow enough"?