Question Where did you get your home loan? Help me!

[okinawaholic]

Where and how did you get your home loan? I'm pretty angry that I'm unable to get one, and the reason being is "disability".

All of my (permanent) income that is stable is from disability in the States, and that is why I have been turned down. However, that amounts to about $5260 per month, untaxed because it's disability income.

Military retirees are able to get a loan based upon their savings and retirement income so I can't see how different this is...

I just can't wrap my head around how a bank would deny based upon the type of income. I did not also get the chance to tell them I have $150,000 to put down as well, which is 25%~ of the house I want. There's no question, even with a 20 year, 35 year, or 40 year loan I wouldn't be able to pay the monthly fee.

Because it's disability income, it's also passed on to my wife in the amount of $2100/mo on top of my $10,000 life insurance upon death.

I need to explain this to a bank and need solid reasoning on this.

This would be discrimination in the States and I did have a little argument with my wife that it should be here too, later finding the Act on the Elimination of Disability Discrimination in Japan of 2013; a recent law passed so she wouldn't be keen to it. It does look like this applies to employment only, but that could change... Seems like I need to slap $10k~ down with a lawyer and pursue suing a bank until they cave and give me the loan.

The only other way to get a loan here is to 1) get a job or 2) the most absurd way: Buy two mansions with my down payment money that have current tenants and show $1000/mo income from those properties. I can't seem to wrap my head around option #2 when that would destroy my ability to get a lower monthly payment (obviously offset by the rental income to a degree, but it just sounds so stupid to do as there is also a tax penalty too). And, of course, option #1 is out of the question.

I have been offered a 10-year/5% loan before. This would break the bank as it'd be 1/2 my stable income and I don't want to have to pay that much.

Any ideas for someone in my situation?

Permanent resident for about 5 years or so, can show proof of income, can show proof of permanent stable income; they just don't like that it's "disability" income because that means I could likely end up not making my payment, but I revert back to my income and how much my wife would get if I do lose it (through death).

Please no questions on how I get that much in disability or what agencies give it and for what reasons unless it pertains directly to getting a loan. Thanks!

 

[thomas]

I claim absolutely no expertise, but Japanese banks seem highly reluctant to extend loans to anyone over 60, especially housing loans. That applies to Japanese citizens and, even more so, foreign residents. I am not sure why your disability pension wouldn't be accepted, though. When applying for a housing loan, you should mention that you can afford to make a down payment of 25 per cent. I remember ours was just a fraction of that.

How many banks have you consulted so far?

Is this is a new house? Or a particularly big one?

 

[okinawaholic]

I claim absolutely no expertise, but Japanese banks seem highly reluctant to extend loans to anyone over 60

I'm 35 years old and the income is permanent from hereon out.

you should mention that you can afford to make a down payment of 25 per cent.

Nobody asked. They all just wanted the paper for pre-application and denied at that point, never being told I only want to borrow 75% of the amount.

How many banks have you consulted so far?

The realtor for the first home we looked for that was within our budget at the time ($220,000) because we didn't have such a large downpayment then applied to everyone, I believe.

Is this is a new house? Or a particularly big one?

It will be a new house. It's looking like around 40 tsubo on 50-100 tsubo of land. A $500,000 house is twice as much as the first home looked at because it's a concrete house as opposed to a wooden frame, which does not last 100 years like a concrete home would.

 

[johnnyG]

Is there a realty agent/biz connected to the house you want to buy? No experience, but I've read that they can help with loans.

Also, you do have a specific house/property in mind? My understanding is that you cannot get pre-approved here, and then go shopping--you have to have a specific property that you want to buy, and then apply for a loan for that property.

 

[okinawaholic]

Is there a realty agent/biz connected to the house you want to buy?

Yeah, www.rcworks.co.jp look to have some great floorplans.

Also, you do have a specific house/property in mind? My understanding is that you cannot get pre-approved here, and then go shopping--you have to have a specific property that you want to buy, and then apply for a loan for that property.

Yeah, we put in for a specific house (the $220k one) and were denied at the pre-approval level, but the banker pushed it through and I was denied at the approval level too... based on my income being 1) disability and 2) out of country (US).

 

[Majestic]

Japanese banks are super conservative with home loans unless you are a permenent resident and have stable, local income. I don't think you will have good luck with a law suit. I think it will be very expensive for you, and the banks can outspend you in court, and the court will generally be sympathetic to the bank. The court will view their lending policies as reasonable and non-discriminatory, as the basis for the loan denial is not made on account of your disability per se, but the fact that the income is inaccessible to the bank should you default on the loan.

 

[mdchachi]

based on my income being 1) disability and 2) out of country (US).

Did the rejection letter explicitly mention the source of income as the reason? Could you call it something else such as a "pension"?

 

[johnnyG]

the fact that the income is inaccessible to the bank

Good point, I hadn't thought of this aspect.

Also, since OP says it's tax-free (and I'll assume they mean here in japan), it may then not be included/specified as income on OP's tax returns here.

I've read elsewhere that shinsei is more 'loan friendly' for foreigners (and maybe another such bank or two?), tho another factor may be that it is okinawa, which may have loan conditions different than the mainland.

 

[Majestic]

lso, since OP says it's tax-free (and I'll assume they mean here in japan), it may then not be included/specified as income on OP's tax returns here.

Yes, I missed that bit. I assume the OP knows what he is talking about when he says it is tax-free, but of course permanent residents are taxed on worldwide income so I don't think we have a full enough picture to give useful advice. What I mean to say is; if the money received in the US is not classified as income here in Japan, then the banks won't regard it as income either - regardless of whether or not it is remitted into Japan.

If the disability payments are indeed considered taxable income, then the OP has a tax problem on his hands. This situation is made slightly more tolerable because if the NTA says its income, then the banks will also view it as income. However, the problem of the location of the funds will still be an issue for the banks as they do not have any kind of consistent visability over this income as they would have with normal Japanese income.

 

[mdchachi]

However, the problem of the location of the funds will still be an issue for the banks as they do not have any kind of consistent visibility over this income as they would have with normal Japanese income.

Even so that shouldn't really matter that much. They have the home as collateral. It shouldn't really matter if you default in the end.

 

[johnnyG]

A loan is an asset for a bank; a loan in default is an asset gone bad.

 

[Majestic]

Exactly.

Or, to say another way, a loan in default is a liability.

In a buoyant real estate market, the bank may be happy with the risk of default, as the underlying asset may well grow in value between the time when the loan was originated, and the time of the default. A $500k house in California may well become a $1,000,000 house in 10 years. Therefore, the person who defaults on that house will leave the bank with a $1,000,000 asset that "only" cost the bank about $400k. Easy money if the real estate market is booming, and the bank can unload the house fast enough.

In Japan, residential real eastate in most of Japan has been stagnant for 30 years (with few exceptions). There is no hope of it ever appreciating like it did in the 80's. So already it is a risky market. Interest on the loans is very low, so the bank doesn't make a lot of money on the loans either. All of this means that the banks are doing all they can to make sure they give home loans to people who can pay off the loans with a wide margin of error - and they don't have the patience or the staff to go through a list of foreign assets or revenue streams to evaluate a foreign buyer's creditworthiness.

If the underlying asset were sufficient incentive to entice the banks to make loans, they could (in theory) loan to students, tourists, transient people, or anyone who could make the down payment. In real life, there is real risk in a bank having to unload foreclosed homes - so they are extremely cautious.

 

[mdchachi]

In such cases they should and do raise the downpayment requirements. But I get your point. Especially in Japan.
I think in the U.S. there's still some incentive to originate loans. If it goes bad, it's somebody else's problem.

 

[okinawaholic]

Did the rejection letter explicitly mention the source of income as the reason? Could you call it something else such as a "pension"?

Word of mouth by the banker that pushed through the pre-approval. It is "disability" income and received from the US so it's presumably untouchable. I just don't understand how this is any different than untouchable retirement income G.I.s have from retirement after 20~ years of service. The only difference is that money is taxed by the US; unsure if by Japan too?

Also, since OP says it's tax-free (and I'll assume they mean here in japan), it may then not be included/specified as income on OP's tax returns here.

It's tax free here. Made sure of that. I am considered low-income with even $5000/mo reported because it's disability income.

shinsei

Never heard of this. Is this a bank? I was thinking of seeing if Citi or 7-Eleven would have a more foreigner-friendly policy as to maybe back the loan in the US in case of a default or something. Seems logical to do, but for one person? Probably won't take the time to try it because it's, frankly, a deal worth less than a penny to them in the grand scheme of things.

I assume the OP knows what he is talking about when he says it is tax-free, but of course permanent residents are taxed on worldwide income so I don't think we have a full enough picture to give useful advice.

I am a PR and the income I proved to get it was disability income/savings. So, the government is well aware of how much I make and it's not to be taxed.

I'm even low income as to when I got a disability here, the medicine would have cost me 30% of $2000/mo (national coverage) because that's how much the medicine costs. However, I have a low-income booklet that the doctors/pharmacy write in and they can only charge me up to $50 (5000 yen) per month maximum, no matter how many times seen by the doctor (regular bloodwork and visits) or adjustment of medicine.

 

[okinawaholic]

But update: I have 24,000,000 million yen cash, 7,000,000 in less liquid form (stock), and 3,000,000 in crypto (if we can pay the realtor in that to take some off the top that'd be great. )

I might go with a lender 10-year/5% or go with a US bank for another 6,000,000 yen with 5yr/10% but refinance each year to knock the lending amount down and stretch out the borrowing term.

Or, get a more beat-up house with the amount and get a reform loan (cheaper than 10/5%) with the same construction company.

My future is looking a bit brighter now... I estimated my cash settlement on the conservative side of 17,000,000 yen (it was much more). Just need to spend time looking for the perfect place for ~30-35m yen.

Alternatively, I could do the silly thing and get 2 or 3 rental properties. That would give me enough monthly income to borrow for my 4th and final place. However, I'd still be stuck paying "rent" (mortgage) for the next 35 years on that which is what I was trying to cut out of my payments completely to be able to save for the future.

 

[mdchachi]

Does it even make sense to buy? The big reason to buy in the U.S. is because appreciation is assumed. But in Japan is that the case?

 

[Majestic]

There are so many red flags on this field, it looks like a Chinese military parade.

 

[okinawaholic]

Does it even make sense to buy? The big reason to buy in the U.S. is because appreciation is assumed. But in Japan is that the case?

It's more of a "store of value" here in Okinawa. You can get a wooden house that depreciates to mere property value or you can build/buy a cement house that is/can be renewed to retain its value, e.g., you buy one for 25,000,000 yen now and renew it for 10,000,000 yen in 30 years on sale for it to sell for 30,000,000 to 40,000,000 (whatever the market conditions are at that time) because cement can outlive your grandkids.

We just found the perfect house for my budget of 25,000,000 today and put in a bid, trying to get a million or two knocked off. The realtor came back and disclosed a suicide took place in the home. Suffice to say, we're not getting it because of superstitions (I'm fine with it, but it's not my choice and not belittling my S/O over her beliefs).

So, looking out for more. If nothing opens up in the next 3-6 months within our budget, I'll tuck it away in the markets and let dividends make it grow until it's big enough to buy something we want and can afford.

 

[okinawaholic]

Decided to buy our first house as a mansion and be able to save up enough to use that as some sort of financing on a house when we have enough saved (rental to offset an unfavorable loan or reforming it for sale to get the other chunk necessary for paying in cash).