Japanese Bank loan for foreign real estate?

[Tokyo Money]

Hello Everyone,

This is my first post on this forum, I've been reading responses to other posts and you all seem very knowledgeable.

My Japanese partner and I own our house in Tokyo. I've been thinking I'd like to buy a flat back in my home country, Australia. I'm wondering if it's possible to get an equity release from a Japanese Bank, say borrow back 50% of the value of our house, in order to buy a flat in Oz. Has anyone done this or something similar? Is it even possible? I know Japanese banks are super conservative, so maybe it's impossible.

[mighty58]

No direct experience myself, so can't give any first-hand comments, but the product you're looking for is called a 不動産担保ローン or a 住宅担保ローン; a Google search for those terms should point you to many potential lenders. You'll have to comb through the fine print to determine which would be best for your needs though.

[Tokyo Money]

Thanks, mighty58, knowing the correct terminology is a big help.

[SARS]

Would you get the loan in JPY or AUD? Lots of foreigners have been burned in Japan on FX risk taken on housing loans.

[Tokyo Money]

I would definitely get the loan in yen, because that’s what we are earning. Those FX fluctuations are too risky.

[SARS]

I would definitely get the loan in yen, because that’s what we are earning. Those FX fluctuations are too risky.

That's the wrong way to think about it. If you take the loan in yen you will be taking on a huge amount of fx risk.

Consider the following scenario where you have a loan in yen on an AUD property.

T=0: AUD:Yen @80
House value = AUD500k = Yen40m
Loan value = AUD500k of Yen = Yen40m

T=1: AUD:Yen @40
House value = AUD500k = Yen20m
Loan value = Yen40m

The house value in yen changes but the loan value doesn't, since it's in yen originally.

What happens now? The bank will probably ask you to address the huge shortfall in assets backing your loan.

[Wales4rugbyWC23]

A while back (15 years or so) there were a couple of Australian banks in Japan that were offering house loans for real estate in Japan and Australia. We were quite desperate at the time, because we didn't have PR- needless to say they weren't very good deals compared to the Japanese banks for a Japanese purchase, and you needed a big deposit and you could only get 3.5 times your yearly salary- We actually applied to one and it took an age. By that time the approval came through our PR had been accepted and we got a loan from SMBC.

I did have however have a Texan friend who went through Lloyds TSB as they were, for an apartment on the Gold Coast. Again this was more than 15 years ago and Lloyds have pulled out of Japan.


A word of warning don't play the currency game with mortgages. My wife is Polish and a lot of her family and friends took out mortgages out in the Swiss Franc and about 10 years ago suddenly the value of the Swiss Franc appreciated greatly in value and overnight their mortgage payments went up 30%. This practise was widespread in Eastern Europe with countries who were still not members of the Euro zone.

I have a few rentals in the UK, the loans have been taken with British banks and the rent is paid in Sterling. Keep it simple and risk free. I am sure there will be some banks in Australia who will accept your Japanese salary as proof of earnings and go from there.

[Tokyo Money]

Thanks for all the input. I'll do a bit more research for sure before I commit to anything.

[Tkydon]

If the yen goes back to Y65 to the AUD, that would be the time to take out a Yen Loan, but not today at Y80

[concerned]

"What happens now? The bank will probably ask you to address the huge shortfall in assets backing your loan."

Yes they will.

Early /Mid 2000s Yen loans to purchase foreign real estate were pedaled by Financial Advisors in Tokyo, I was sold/conned into taking one.
Loans for property in the UK were being offered, STG to JPN rate at the time was about 250 Yen to 1 STG at the time, the sales pitch went as follows:

1)You will be paying very low interest rate of 1.5% as you borrowed in Yen
2) Average STG to Yen rate is about 180 Yen in previous years, and it will be unlikely to fall to that low exchange rate again
3)As the interest rate is so low there is no need to pay down the loan, instead pay into an Endowment fund; a range of of offshore insurance products that are expected to pay 7% per year (This will cover you in case exchange rate should drop down to 180 Yen to STG)

While I went with the above, and it seemed ok for a couple of years, Lehman hit and it un-ravelled... What was not explained to to me when I made the purchase was that you needed to maintain a certain LTV of about 80%, when this changed due to STG falling I had to make cash payments to the bank to maintain this LTV, there were times when I had to make payments > 50K STG within 2 weeks... or the Loan would be converted to STG at the lower rate I was told.... Some of us kept making these payments while STG crashed all the way to 118 Yen to STG, others offered up other assets towards maintaining this LTV ratio , some of us were unable to and had loans converted at the lower rates... some people sued the Financial advisors who pedaled us these products...

Of course those * offshore insurance products " that were supposed to return 7% per year never did perform due to their high fees and these products also crashed badly during the Lehnman shock ...

Believe me you do not want to borrow in one currency to buy property valued in another currency.