How Japanese mortgages work
- Rates are low but rising. Variable rates of 0.5–1.0% were the norm through 2024; the Bank of Japan's rate hikes since then have pushed variable and fixed rates up. Most borrowers still choose variable.
- Terms of 35 years are standard, and the loan usually has to be repaid by age 80. Some banks now offer 40- or 50-year terms.
- Bonus payments (ボーナス払い) let you allocate part of the principal to twice-yearly payments in June and December. They lower the monthly amount but are risky if bonuses shrink.
- Group credit life insurance (団信) is normally required and included in the rate; it pays off the loan if the borrower dies. Optional riders for cancer or serious illness add about 0.1–0.3% to the rate.
- The mortgage tax credit (住宅ローン控除) refunds 0.7% of the year-end balance from income tax and resident tax for up to 13 years for new energy-efficient homes (10 years for many existing homes). It often makes early prepayment unattractive while it lasts.
Equal payment vs. equal principal
With equal payment (元利均等) the monthly amount never changes; early payments are mostly interest. With equal principal (元金均等) you repay the same slice of principal every month, so the first payment is the highest and the total interest is lower. On ¥35,000,000 at 1.0% over 35 years, equal principal saves roughly ¥600,000 of interest but starts about ¥13,000 a month higher. Switch the method above to see your own numbers.
Should you prepay?
A lump-sum prepayment that shortens the term removes all the interest on the months it cuts, which is why it saves more than a payment-reducing prepayment of the same size. At today's rates the saving is modest, and while the mortgage tax credit is running, the 0.7% refund on the balance can be worth more than the 0.5–1.0% interest you would avoid. Keep an emergency fund first; prepay from what is left.
FAQ
Can foreigners get a mortgage in Japan?
Yes. Most major banks lend to permanent residents on the same terms as Japanese nationals. Without permanent residency the choice is narrower, but several banks and Flat 35 (a fixed-rate loan backed by the Japan Housing Finance Agency) accept applicants with a stable job in Japan, usually with a larger down payment.
What is a typical mortgage rate in Japan?
Variable rates from major and online banks have been around 0.5–1.0% and 35-year fixed loans around 1.5–2.5% in 2025–2026. Rates started rising in 2024 after the Bank of Japan ended negative rates, so compare current offers.
Equal-payment or equal-principal?
Equal-payment keeps the monthly amount constant and is the default at most lenders. Equal-principal starts higher and falls every month; total interest is lower. Choose it only if the early payments fit your budget.
Should I prepay my Japanese mortgage?
With rates near 1% the interest saved is modest, and the mortgage tax credit (0.7% of the year-end balance for up to 13 years) can outweigh it, so many households prepay only after the credit period ends. Term-shortening prepayments save more interest than payment-reducing ones.