When considering the purchase of a used condominium, the choice of home loan is the cornerstone of your financial plan. Flat 35 is a product with a fixed interest rate for the entire term, locking in your repayment amount, which makes it excellent for long-term cash flow management. This article explains the types of Flat 35 loans, their benefits, eligibility conditions, and the risks of misusing them for investment properties.
What Kind of Home Loan Is Flat 35?
Flat 35 is a fixed-rate home loan for up to 35 years, provided through a partnership between private financial institutions and the Japan Housing Finance Agency. Its greatest feature is that the interest rate and repayment amount do not change until repayment is complete, making it easy to plan for your life and finances. It is also available for used condominiums.
What Are the Types and Interest Rate Discount Plans for Flat 35?
Flat 35 (Standard Type)
A fully fixed interest rate loan with no guarantee fee or early repayment fee. It is designed for peace of mind, with zero interest rate risk.
Flat 35 S (Energy-Efficient and Earthquake-Resistant Discount)
For housing that meets certain standards for energy efficiency, earthquake resistance, barrier-free accessibility, or durability, this plan reduces the interest rate by 0.25% per year for the first 5 to 10 years. There are two options: Rate Plan A (10-year reduction) and Rate Plan B (5-year reduction).
Flat 35 Renovation
This plan covers the purchase of used housing combined with performance-improving renovations. When recognized improvements in energy efficiency or earthquake resistance are made, the interest rate is reduced by 0.5% per year for the first 5 to 10 years. It is well-suited to a used condo plus renovation strategy.
Flat 35 Child-Rearing Support and Regional Revitalization Types
Targeted at properties designated by local governments actively supporting child-rearing or rural migration (U-I-J turn moves). The interest rate is reduced by 0.25% per year for the first five years. It can be combined with Flat 35 S or Renovation plans.
What Are the Three Main Benefits of Flat 35?
- Fixed interest rate for the entire term: Zero interest rate variation risk for 35 years. Unlike variable-rate loans, future repayment plans can be finalized.
- No guarantee fee or early repayment fee: These costs, which arise with typical financial institution loans, are not required.
- Interest rate reduction based on housing performance: Even for used condominiums, a 0.25% reduction may be available if conditions are met.
Why Is It Illegal to Use Flat 35 for Investment Properties?
Flat 35 can only be used to purchase a "residential home." Applying a home loan to an investment property constitutes fraudulent behavior and may result in a demand for full repayment. Multiple cases have been reported of people being advised by real estate investment companies to use Flat 35 for investment properties and then being forced to refinance at higher interest rates. Choosing a loan suited to its intended purpose is a fundamental principle of investment.
For details on financial planning, please also refer to Is Difficulty in Real Estate Investment Due to Insufficient Comprehensive Skills? Explaining the Three Barriers of Tax, Law, and Construction.
Related Reading
- Is Difficulty in Real Estate Investment Due to Insufficient Comprehensive Skills? Explaining the Three Barriers of Tax, Law, and Construction
- Real Estate Exit Strategies in an Era of Inflation and Rising Construction Costs
- Wealthy Foreign Investors Accelerate Purchases of Japan's Luxury Real Estate
FAQ: Common Questions About Flat 35
Q1. Can Flat 35 be used for a used condominium?
Yes, it can. However, the property must meet the technical standards of the Japan Housing Finance Agency. Check the age of the building and seismic standards in advance.
Q2. What is required to qualify for Flat 35 S?
A certificate (conformity certificate) showing that standards such as energy efficiency rating and earthquake resistance rating are met is required. For used condominiums, an existing home inspection may be a condition.
Q3. Can I make early repayments freely?
Early repayment is available free of charge via internet procedures. By reducing the principal during periods when interest rates are low, you can significantly reduce the total repayment amount.
Q4. Which is more advantageous—variable or fixed interest rate?
In the current low-interest-rate environment, variable rates have lower initial costs but carry the risk of rising interest rates. Flat 35 is suited to owner-occupied properties intended for long-term holding, where the peace of mind of a fixed future repayment amount is valuable.
Q5. What are the main reasons for failing Flat 35 screening?
History of delinquency in credit information, non-conformance of the property with technical standards, and exceeding the repayment burden ratio (annual repayment as a proportion of income) are the main reasons. It is recommended to check your situation through a preliminary review (pre-screening).
