Securing a Home Loan for a Pre-Owned Condo in Japan: Limitations and Unique Features

When it comes to pre-owned condominiums, there are valid worries about building and facility deterioration compared to newly constructed properties. This prompts the common question: “Can I secure a mortgage?” In this comprehensive article, we delve into the possibilities of obtaining a mortgage when purchasing an existing condo in Japan.

We will dive into the specific scenarios where restrictions may apply, shedding light on the intricacies of properties that may pose challenges in loan qualification. By referencing this article, you can gain valuable insights to ensure a smooth and worry-free process when purchasing a pre-owned condominium.

Can I purchase a Pre-owned Condo using a home loan？

Even older pre-owned condominiums can be purchased with a mortgage.

Some financial institutions offer loans that include not only the purchase price, but also other expenses such as remodeling/renovation costs and brokerage fees.

However, since the deposit is generally paid in cash at the time of the sales contract, it cannot be included in the mortgage loan.

If renovation costs and other expenses are included, the loan amount will be larger, and the screening process may be more difficult.

Therefore, we recommend that you first consult with a real estate agent and undergo preliminary screening for a mortgage loan.

What are the cases where restrictions are placed on home loans for the purchase of pre-owned condominiums?

Some financial institutions place restrictions on the repayment period and loan amount when granting a mortgage loan for the purchase of an existing condominium.

The mortgage loan review process takes into consideration not only the Buyer’s ability to repay the loan, but also the collateral value of the property.

This is because, in the unlikely event that repayment is delayed, the property will be auctioned to recover the loan amount.

For this reason, when a mortgage is taken out on an existing condominium, the amount that can be borrowed tends to be set lower than for a newly built condominium.

The repayment period may also be limited to the number of years of legal life minus the age of the building.

For example, in the case of a 30-year-old used condominium with a steel-framed reinforced concrete structure and a legal life of 47 years, the standard repayment period for a mortgage loan is 17 years.

What Key Characteristics of Pre-Owned Condominiums Pose Challenges for Mortgage Qualification?

When it comes to obtaining a mortgage for a pre-owned condominium, certain characteristics can present hurdles in the qualification process. In this section, we delve into the specific attributes that make it challenging to secure a mortgage for an existing condominium.

Here are the characteristics:

● Properties built under old Seismic Resistance Standards

● Properties that cannot be rebuilt

● Properties that are leasehold not freehold

The old seismic resistance standard is the seismic resistance standard applied to buildings confirmed to be built before May 31, 1981.

Used condominiums built more than 42 years ago may be under the old seismic resistance standard, and if their seismic resistance is low, they are unlikely to be approved for a mortgage loan.

“Properties or buildings that cannot be rebuilt” means that they are located in urban and semi-urban planning areas and/or are built on land that does not meet road access obligations. If the building is demolished, its collateral value will decrease because it is impossible to construct a new building.

Leasehold properties are on land that is leased from the landowner, which means that land rent is charged, which is a disadvantage in the mortgage application process.

In conclusion

Acquiring a mortgage to purchase an older, pre-owned condominium is indeed feasible. However, it’s important to note that certain limitations may apply concerning the loan amount and repayment duration, considering the collateral value. Specifically, securing a loan for an older condominium with outdated earthquake resistance standards or a leasehold interest can be particularly challenging. To ensure a well-informed property selection process, we encourage you to consult this article as a valuable resource. It will aid you in making the right choice while navigating the complexities associated with such properties.