RetireJapan

My ten year tax mortgage credit is coming to an end this time next year. How I am going to miss this, over the last ten years I have hardly paid any national income tax thanks to one of my universities over taxing me every month.
Anyway, I still have 25 years on the mortgage, which will take to just under 70 till my last repayments. I hope to be well into non-working twilight years by then. Ideally, I would like to increase my monthly payments to pay the mortgage off in 15 years. My bank SMBC offer free one-off repayments, but I would like to know if it is possible for 15 years to increase my monthly repayments. Has anyone had experience of this?

My mortgage was through Resona Bank and they did not want early payments on a monthly basis. My impression was that it complicated their paperwork. Instead we agreed that I would make an early payment once a year. There were no extra fees or penalties for those extra payments.

I have a mortgage from Shonai Bank (a small regional bank from Yamagata) and I can make additional payments easily online with no fee. I generally put an extra 100,000 in twice a year.

Easiest thing would just be to ask your bank if you want to change the repayments, no?

Shinsei Bank allows it in two forms and neither incurs fees.

1. You can make one-off early repayments at any time you want. Just log in to your account and enter in your preferred amount.
2. You can arrange to have a "smart" account where they drain the entire balance every month and put it toward your mortgage.

AreTheyTheLemmings? wrote: ↑Sat Aug 15, 2020 12:38 am You can arrange to have a "smart" account where they drain the entire balance every month and put it toward your mortgage.

That is very cool!

RetireJapan wrote: ↑Sat Aug 15, 2020 1:18 am

AreTheyTheLemmings? wrote: ↑Sat Aug 15, 2020 12:38 am You can arrange to have a "smart" account where they drain the entire balance every month and put it toward your mortgage.

That is very cool!

Shinsei Bank goes up in my estimation, but from a very low point since they made me close my GoRemit account because I hadn't used it for two years.

AreTheyTheLemmings? wrote: ↑Sat Aug 15, 2020 12:38 am Shinsei Bank allows it in two forms and neither incurs fees.

1. You can make one-off early repayments at any time you want. Just log in to your account and enter in your preferred amount.
2. You can arrange to have a "smart" account where they drain the entire balance every month and put it toward your mortgage.

Any current Shinsei home loan customer can confirm if these options are still available? I've heard a lot of negative feedback about Shinsei and their 'retreat from the foreigner market', but as products go, this 'smart account' to drain the balance off the mortgage sounds great....

If there are no better options, you could always resort to making small one-off payments on a monthly basis. Not ideal obviously as you'll need to do it manually, but it's doable.

My personal view is that it is not a good idea to pay down your mortgage early, for three reasons:

1. Your Mortgage in Japan comes with a Life Insurance Policy. If you die, your loan is completely paid off, leaving the property for your heirs, without having spent additional money that you could have put in your bank or investment account, so they get the house and the bank account, and not just the house.

2. Your Mortgage in Japan has a very low interest rate (it's free money). It is not like having Expensive Debt on a high interest credit card.
If you have Expensive Debt on a high interest credit card, Pay It Off.
However, If you invest the money that you plan to pay down the Mortgage with, and make a reasonable return (say 5%) then you pay the interest on the Mortgage and still have money left over to build that nest egg for retirement. i.e. a Net Gain on that money of 4%. If you use it to pay off the mortgage, the gain on that investment is just the 1% interest saved.

3. A smaller amount of money invested in those retirement accounts now will grow much more over the longer time, than the money you could save when you have completely paid off the mortgage, so put that extra money to work now, in either (in order of importance in my opinion);
1. Long-Term Disability Insurance - to protect your income and ability to pay the Mortgage if you become disabled during your working life (depends how old you are)
2. 401k contributions
3. iDECO contributions
4. NISA
or 5. Regular Investment Account.

My recommendation is to keep your eye on Mortgage Interest Rates on offer, and if you see a rate that is lower than you are currently paying, go and speak to that bank and get them to provide you with an estimate of how much you would save over the remaining life of the mortgage, after incurring the refinancing fees. If it is enough to make it worthwhile, refinance at the lower rate, lock in the rate, and either;
1. Take the money you save monthly and put it into 3. above. (Preferred)
Remember, if you take that money saved and invest it in an iDECO or NISA, you are actually investing that amount tax-advantaged to grow even faster. (This is similar to reinvesting the Tax Refund at the end of the year).
or
2. Have the new bank keep the new payment the same as the old payment, and use the interest rate advantage to shorten the mortgage duration slightly, maybe by a couple of years. This does not increase your payments.


If you want to reduce your Tax, as a salaried employee you don't have many options, but you could consider buying Rental Property so that you can take the Depreciation Expense as a loss against your Salary Income Tax. That is a discussion for another day...

The government gives a 10 (13 if you do it this year) tax break on mortgages. It makes getting a mortgage incredibly advantageous.