When considering the purchase of a used condominium, whether a housing loan can be used is an important decision criterion. Understanding in advance the screening conditions that differ from those for newly built properties, and the difficulty of obtaining full financing, is key to avoiding failures in financial planning.
Can a housing loan be used for a used condominium?
A housing loan can be used for a used condominium as well.It is also eligible for the housing loan deduction (special deduction for housing loans, etc.), and an amount equivalent to 1% of the year-end loan balance is deducted for 10 years. For used condominiums purchased on or after April 2014, the deduction cap is 20 million yen, and for certified long-term superior housing properties it is 30 million yen.
Why is full financing difficult for used condominiums?
Full financing means purchasing a property with no personal funds and borrowing the entire amount. The main reason full financing is difficult for used condominiums is the gap between the financial institution's collateral valuation and the property price.
Renovated used condominiums tend to have higher market prices, but a financial institution's collateral valuation deducts for the building's age. As a result, the valuation may come in below the purchase price. The inability to borrow the amount needed to cover this difference is the main reason full financing is denied.
What are the seven reasons a housing loan screening may fail?
Screening may fail even if there are no issues with income or repayment history. Check the following seven points in advance.
1. A delinquency record remains
Delinquency records for consumer finance loans or mobile phone charges remain on credit records for 3 to 10 years. As long as a delinquency record remains, passing a housing loan screening continues to be difficult.
2. Large outstanding balances on other loans
If there is an outstanding balance on a car loan or other borrowing, your repayment capacity may be questioned and the screening becomes stricter. It is prudent to organize other loans before taking out a housing loan.
3. Applying to include incidental costs in the loan
If incidental costs such as repair expenses and the deposit are included in the loan, the screening becomes stricter. Preparing incidental costs in cash improves the likelihood of passing the screening.
4. Older age at the time of application
The higher your age at the time the loan is fully repaid, the less favorable the screening becomes. If you take out a 35-year loan at age 40, you will finish repayment at 75, and because repayment during retirement is assumed, the screening becomes stricter.
5. Non-regular employment
For long-term loans of 30 to 35 years, the prospect of continued employment is heavily weighed. If you are in non-regular employment, it is effective to highlight your contract renewal history and stable track record.
6. Frequent job changes or applying immediately after changing jobs
If you have changed jobs many times, doubts may arise about continued employment. After a job change, your approval rate improves if you apply after building some length of service.
7. Concerns about health condition
Housing loans usually require enrollment in group credit life insurance (団信). If you have a pre-existing condition, you may not be able to enroll, and in some cases the loan itself cannot be arranged.
For loan strategies in used condominium investment, please also see the Used Condominium Investment Deposit Guide.
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Frequently Asked Questions (FAQ)
Q1. Can I receive the housing loan deduction when buying a used condominium?
Yes. The deduction cap is 20 million yen (30 million yen for certified long-term superior housing), and it applies for 10 years.
Q2. Is full financing for a used condominium completely impossible?
No, but it is difficult in many cases. If the property is one where the collateral valuation matches the purchase price, there may be a possibility.
Q3. If my application is rejected, how long should I wait before trying again?
Delinquency records disappear after 3 to 10 years. It is effective to apply again after improving conditions such as length of service and outstanding balances on other loans.
Q4. How much personal funds should I prepare?
If you have personal funds equal to 10% to 20% of the property price, screening is more likely to pass. You will also need to prepare incidental costs separately as well (5% to 10% of the property price).
Q5. Is there a way to obtain a housing loan even with non-regular employment?
Some housing loans, such as フラット35, have more flexible employment-form requirements. It is also effective to show income performance in writing and present it proactively to the financial institution.
