RetireJapan

Any experiences of early repayment of Japanese mortgages?

My mortgage is with SMBC, I have another 24 years with them of a 35-year mortgage. Ideally, I was looking to increase my monthly payments, but the woman at the call centre said that I would need to show my recent financials, tax returns and things like that and that once I had agreed to an increase, I could not decrease it after that. She recommended to do it monthly repayments through internet banking. Although it is free to do this, it is just a pain to do it every month, instead of it being done automatically. I have a buy to let mortgage in the UK and the building society are incredible flexible with over payments and going back to interest only repayments.

Seems like it depends on the lender. I have my mortgage with a small local bank (Shonai Bank from Yamagata) and I can easily make one-off payments through the website -2-3 clicks, takes about 30s.

Once that is arranged they take the extra payment from my bank account along with the regular payment.

SMBC might have misunderstood you as wanting to remortgage maybe?

RetireJapan wrote: ↑Mon Sep 12, 2022 7:46 am Seems like it depends on the lender. I have my mortgage with a small local bank (Shonai Bank from Yamagata) and I can easily make one-off payments through the website -2-3 clicks, takes about 30s.

Once that is arranged they take the extra payment from my bank account along with the regular payment.

SMBC might have misunderstood you as wanting to remortgage maybe?

Seems like they're asking to increase the monthly payments (pay 200k a month instead of 100k) which would be a form of re-mortgaging.

Easiest thing seems to be make a larger manual payment once or twice a year.

Wales4rugbyWC19 wrote: ↑Mon Sep 12, 2022 6:46 am Any experiences of early repayment of Japanese mortgages?

My mortgage is with SMBC, I have another 24 years with them of a 35-year mortgage. Ideally, I was looking to increase my monthly payments, but the woman at the call centre said that I would need to show my recent financials, tax returns and things like that and that once I had agreed to an increase, I could not decrease it after that. She recommended to do it monthly repayments through internet banking. Although it is free to do this, it is just a pain to do it every month, instead of it being done automatically. I have a buy to let mortgage in the UK and the building society are incredible flexible with over payments and going back to interest only repayments.

Just curious I assume the UK buy to let has a pretty high interest rate, especially with the UK hiking rates at the moment. Is there a reason to pay off the SMBC mortgage instead of reducing the UK mortgage? Also with a Japan mortgage the life insurance will pay off the mortgage in the case of your passing. The reason I am asking is that I am in the exact same position myself, UK buy to let and SMBC mortgage with 30 yrs remaining.

concerned wrote: ↑Mon Sep 12, 2022 11:13 am

Wales4rugbyWC19 wrote: ↑Mon Sep 12, 2022 6:46 am Any experiences of early repayment of Japanese mortgages?

My mortgage is with SMBC, I have another 24 years with them of a 35-year mortgage. Ideally, I was looking to increase my monthly payments, but the woman at the call centre said that I would need to show my recent financials, tax returns and things like that and that once I had agreed to an increase, I could not decrease it after that. She recommended to do it monthly repayments through internet banking. Although it is free to do this, it is just a pain to do it every month, instead of it being done automatically. I have a buy to let mortgage in the UK and the building society are incredible flexible with over payments and going back to interest only repayments.

Just curious I assume the UK buy to let has a pretty high interest rate, especially with the UK hiking rates at the moment. Is there a reason to pay off the SMBC mortgage instead of reducing the UK mortgage? Also with a Japan mortgage the life insurance will pay off the mortgage in the case of your passing. The reason I am asking is that I am in the exact same position myself, UK buy to let and SMBC mortgage with 30 yrs remaining.

I have been paying off the buy to let mortgages through one off payments and monthly overpayments for the last six years, since the pound crashed in value since the Brexit vote, although the pound has come back a bit with the weakness of the yen in the last few months. My wife and kids are in Poland now going to an international school, so the rents are supporting them for one year I am only paying the interest for the buy to let mortgages. I really appreciate the flexibility of the buy to let mortgages.

As for why I want to overpay my SMBC mortgage repayments; I took the mortgage out when I was 34 years old, it is a 35-year mortgage, so I will be 69 when I finally pay it off. I intend to retire when I am 60, and my current monthly mortgage repayments are 135,000 yen a month. I do not want half of my retirement (planned) income to having to be spent on the remainder of my mortgage. The free life insurance that SMBC gave is appreciated but doesn't help when I am in sixties coping with living expenses. I watched an interesting personal finance segment on NHK news recently that really brought it home to my wife and I when they reported on a salaryman husband who took out his mortgage in his early forties, was forced to retire at 60 from a well-paid job and had to do part time work to the age of 70 because he hadn't chipped away at his mortgages over the years, and the family's mortage repayments were almost the same as mine.

Finally, the 10-year tax credit has finished so there is no incentive to keeping my principal so high.

Wales4rugbyWC19 wrote: ↑Mon Sep 12, 2022 11:55 pm As for why I want to overpay my SMBC mortgage repayments

This is ultimately a personal decision and everyone should do what makes them comfortable. A few thoughts (not advice or criticism!):

Remortgaging to increase your current payments and shorten the life of the loan has a big drawback in terms of flexibility: you may not be able to get it changed back in the future if you need to. Making voluntary payments avoids this problem, although they are slightly annoying in that you have to remember to log in and make them. Doing it once or twice a year would cut down on this. But even the voluntary payments are inflexible in that if you decide you want them back in the future, there is no good way to take them out of the principal of the home.

Pretty much any investment is likely to return more than the interest on a home loan. Taking the money you were planning to overpay the mortgage with and investing it may leave you with a lump sum at 60 that is enough to pay off the mortgage and leave some left over (depending on the timescale but I assume you have a decade or two).

The life insurance is a wild card and again provides flexibility: if the worst happens the loan is cancelled and your family also have the money that you didn't choose to pay into the mortgage.

The ultra low rates here make Japan different enough that standard advice from the UK or the US doesn't quite fit. I made extra payments to my mortgage for the first couple of years (enjoyed watching the numbers go down) but then realised that it made more sense for me to put that money into my investments instead. Then I could choose to use that money to pay down the mortgage in the future, or not.

" I was 34 years old, it is a 35-year mortgage, so I will be 69 when I finally pay it off. I intend to retire when I am 60, and my current monthly mortgage repayments are 135,000 yen a month."
I was 49 when I took out mine, so it will run till I am 84. I pay 95,000 yen a month, but I am not too worried about it. I see it same as paying rent, with the advantage that I am the landlord..

After more than 10 years with BTM, and some time after my super low 10 year fixed rate expired, I refinanced to Aeon for a new 10 year fixed rate.

Many banks will tell you that you can't refinance at the same bank, and therefore have to apply somewhere else - well that was my experience.

The potential candidate new bank will run a simulation, even with refinancing costs, and will tell you if you will be better or worse off for the whole life of the mortgage - whether it is economically beneficial to you to do it.

I was also on a 35 year (variable after fixed 10 years ran out, but variable rates are still very low). I took the opportunity and the saving achieved by refinancing to slightly up the payment and reduce the length of the loan slightly from (XX - don't remember) to 65. Not a real big difference, but slightly better...

Other than that, and since then, I do not believe in paying down the mortgage or paying it off.

A Home Loan is Good Debt, as opposed to Bad Debt on Credit Cards, High Interest Loans, etc..

If you pay your loan early, you are paying yourself a return equivalent to the Interest Rate (saved on that money), when you could invest it at a much better rate of return in iDECO, NISA, etc..

Some things to think about

If you are in the early years of your Mortgage with the Annual Tax Deduction, the Tax Deduction at the end of each year is based on the outstanding balance on the mortgage at the end of each year, but if you paid extra payments on the loan, the balance is lower, so your tax deduction is less than it could/should/would have been... So it probably does not pay to make any additional payments until after the duration of your Mortgage Tax Deductions is finished. So paying the loan down is Tax Inefficient / Disadvantaged by your Marginal Tax Rate on the difference of the 1% of the original Year End Balance minus 1% of the actual lower Year End Balance...


If you pay the mortgage down on the property, and you die, your family gets the house...
BUT, if you don't pay down the loan, and instead make Tax Advantaged Investments, your family gets the Cash / Investments, AND the Life Insurance Policy on the Mortgage pays off 100% of the outstanding balance, so they get the house free and clear AS WELL!