When considering a home loan, many people place "Flat 35" on their shortlist. Flat 35 has distinctive features that differ from private mortgage products, and depending on your circumstances, it can be a highly advantageous option. In this article, we explain the overview of Flat 35, its screening standards, the screening process, and its advantages and disadvantages.
What Is Flat 35?
Flat 35 is a fully fixed-rate home loan offered through cooperation between the independent administrative agency Japan Housing Finance Agency and private financial institutions. Its purpose is to support housing access, and one of its defining features is that there is no interest-rate fluctuation risk during the repayment period.
In practice, a private financial institution originates the home loan, after which the Japan Housing Finance Agency purchases the claim and securitizes it. The contract is signed through a private lender, but in substance the financing comes from the agency.
What Are the Screening Standards for Flat 35?
There are four main standards used in Flat 35 screening.
- Age: Under 70 years old at the time of application (applicants aged 70 or older may still qualify under a parent-child relay repayment arrangement)
- Repayment burden ratio: 30% or less for annual income below 4 million yen, and 35% or less for annual income of 4 million yen or more (including car loans and similar obligations)
- Loan amount: Between 10 million yen and 80 million yen, and within the construction cost or purchase price
- Eligible property: Floor area of at least 70 square meters for detached houses and 30 square meters for condominiums, purchase price of 100 million yen or less, and compliance with the agency's technical standards
What Is the Flat 35 Screening Process?
Preliminary Screening
Your borrowing conditions and repayment capacity are reviewed. Required documents include identification (driver's license or insurance card), registered seal, proof of income (withholding slip or taxation certificate), and certificate of residence. It is smoother if you complete a loan simulation in advance.
Formal Screening
After passing preliminary screening, you submit the formal application to the Japan Housing Finance Agency. The required documents are basically the same as those used for the preliminary screening.
What Are the Advantages of Flat 35?
A repayment plan is easier to build with a fixed rate for the full term
Because the total repayment amount is fixed at the time you borrow, you can avoid the risk of future interest-rate increases. It is well suited to people who want a stable financing plan compared with variable-rate loans.
No guarantee fee and no prepayment fee
Private mortgage products often require a guarantee fee paid to a guarantee company, sometimes amounting to several hundred thousand yen, but Flat 35 does not. Another benefit is that prepayment fees are also free, making it easier to repay early when you have surplus funds.
Enrollment in group credit life insurance (団信) is optional
With private loans, enrollment is mandatory in most cases. Flat 35 makes it optional, so it can also be used by people who cannot enroll in group credit life insurance for health reasons.
What Are the Disadvantages of Flat 35?
Because it is fixed-rate, it may become relatively expensive in a low-interest environment
If interest rates fall after borrowing, there is a risk that the total repayment amount will be higher than with a variable-rate loan.
Loan handling fees and insurance-related fees may apply
Instead of a guarantee fee, a loan handling fee is charged. In addition, if you choose to enroll in the optional group credit life insurance, separate fees are required.
The property's technical standards are strict
The technical standards review for the building is stricter than with private loans, so properties that do not qualify may fail screening. Extra caution is needed, especially with pre-owned properties.
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Frequently Asked Questions (FAQ)
Q. Is Flat 35 easier to pass than other home loan screenings?
It is generally considered easier because the income and health-related restrictions are relatively limited. However, you should pay close attention to the strict technical standards for the property.
Q. Can Flat 35 be used for pre-owned properties as well?
Yes, it can. However, the property must have been built in or after June 1981 and must satisfy the agency's technical standards. Older properties may require a conformity inspection.
Q. What is a parent-child relay repayment arrangement?
It is a structure in which a parent and child repay the loan together. This makes it possible for a parent aged 70 or older to apply.
Q. What interest rate does Flat 35 offer?
It varies depending on the repayment term, loan-to-value ratio, and handling financial institution. Please check the latest rate list on the official website of the Japan Housing Finance Agency.
Q. Is there a variable-rate version of Flat 35?
Flat 35 is available only as a fully fixed-rate product. If you want a variable rate, consider a home loan from a private financial institution.
