What are the differences in the ease and conditions of loan applications between purchasing new and second-hand houses?

Okay, no problem. There are indeed quite a few differences between applying for a loan for a new property versus a used one in Japan. I'll explain it clearly in plain language so it's easy to understand.

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New vs. Used Homes: What's Different in Loan Applications?

Overall, loan applications for new homes are generally easier and have more lenient conditions than for used homes.

This is mainly because when banks assess a property's value, new homes have a clearer value and lower risk. Think about it: the bank lends you money with the house as collateral. What they care most about is how much that collateral is actually worth and whether it will depreciate significantly in the future.

Let's break down the differences in a few key areas:

1. Core Difference: The Property's "Appraised Value"

This is the biggest difference and directly affects how much you can borrow.

• New Home (Shinchiku - 新築)

  • Simple, Direct Appraisal: The value of a new home is essentially its selling price. Whatever the developer sells it for, the bank accepts that price. Because it's brand new, the value is very transparent and undisputed.
  • Higher Loan-to-Value (LTV): Because the value is clear, banks are often willing to lend up to 90% or even 100% of the selling price (known as フルローン or Full Loan). So, when buying new, you might only need to prepare cash for closing costs like registration fees and taxes, making the down payment pressure relatively lighter.

• Used Home (Chūko - 中古)

  • More Complex Appraisal: The value of a used home is not simply the price you agree to pay. The bank will conduct its own independent "security appraisal," either by sending an appraiser or using data models. This appraised value considers many factors like location, age, building structure, maintenance condition, and comparable sales in the area.
  • Uncertain Loan Amount: This can lead to a key issue: the bank's appraisal value might be lower than your purchase contract price.
    • Example: You find a used home and agree on a price of 40 million yen with the seller. But the bank appraises it and decides it's only worth 35 million yen as collateral. In this case, the bank will only lend you up to 35 million yen. You'll need to cover the 5 million yen difference yourself with cash (down payment). This is more common with older homes or those in less desirable locations.

2. Loan "Term" (Duration)

How long you can borrow for directly impacts your monthly repayment burden.

• New Home

  • Easier to Get Maximum Term: It's usually easy to get the longest possible loan term, like 35 years. Because the house is new, its "statutory durable years" (essentially its designed lifespan) are at their maximum. The bank isn't worried the property will deteriorate significantly before the loan is paid off.

• Used Home

  • Term May Be Limited: The bank considers the property's "remaining lifespan." In Japan, buildings have different statutory durable years based on structure (e.g., wood: 22 years, reinforced concrete: 47 years). When approving a loan, banks typically require that the loan term ≤ (Statutory Durable Years - Current Age of the Property).
    • Example: A reinforced concrete apartment has a statutory durable life of 47 years. If the building is already 20 years old, its remaining "life" is 27 years. The bank will likely only offer a maximum loan term of 27 years, not 35.
  • Impact: A shorter loan term means higher monthly repayments, requiring a higher income to qualify.

3. Interest Rates and Special Offers

• New Home

  • Often Have Partnership Deals: Large developers often have partnerships with major banks, offering so-called "tie-up loans" (提携ローン). These loans not only may have a faster approval process but can sometimes offer interest rates more favorable than standard market rates.

• Used Home

  • Generally Standard Rates: When buying used, you typically need to shop around banks yourself to apply for loans at their standard rates. While you can compare offers, it's rare to find the kind of packaged deals and preferential rates often available for new homes through developers.

4. Application Process and Documentation

• New Home

  • Relatively Streamlined Process: Because you're often dealing with the developer's partner bank, much of the property documentation (like building confirmation certificates, blueprints) is prepared by the developer. You mainly need to provide personal income and identification documents. The process is quite standardized.

• Used Home

  • More Documentation Required: Besides personal documents, you and the real estate agent will need to gather detailed information about the specific used property. This includes the real estate registry certificate, past maintenance records, etc. For older properties, the bank might also require documents like a "Seismic Standards Compliance Certificate"; without it, getting a loan might be difficult or come with a higher interest rate.

Summary

Key Advice

1. If you're considering a used home, especially one that's older (e.g., over 25 years), strongly consider getting a "pre-approval" from a bank before signing the formal purchase contract. Take the property details to the bank to find out roughly how much they might lend you and for how long. This gives you a clearer picture and avoids the awkward situation of signing a contract only to find out you can't get the loan or the amount is insufficient.
2. If you're buying new, while the developer's partner bank is convenient, it doesn't necessarily offer the lowest rate. Definitely shop around and compare offers from other banks too; you might find a better deal that suits you.

Hope this explanation helps! Buying a home is a big deal, and the loan is crucial – it never hurts to be well-informed.