As quickly as we could we collected the necessary documents for JA. Since they asked for three years’ worth of tax information we not only had to go back to the Narita tax bureau, we had to go into Tokyo to ask for proof of local taxes that we paid to Arakawa Ward for the first half of 2011, since that’s where we were living. Also proof of health insurance payments. We wondered what we would have had to do if we’d moved much farther away. As it was, going into Tokyo was enough of a pain in the ass since the different offices always seem to be crowded.
We submitted all the documents to the loan officer, who said it would take a few weeks for them to look through them but he had already assured us we were good. At this point a curious thought occurred to us. We had told A-1 that we were going to borrow money from JA. We expected N to act put out since he had gone to the trouble of introducing us to SBI, but in the end he didn’t really care. As long as we had the money he couldn’t complain. But, in actuality, we didn’t have the money, and wouldn’t for a long time. A lending institution won’t transfer the funds attached to a loan for a new home, meaning one that is being occupied for the first time, until the home is ready to be occupied, and in our case that wouldn’t be until Christmas at the earliest. In fact, we hadn’t signed the contract with A-1 yet, though it had been drawn up. The sticking point for us was the payment schedule. First we had to pay the design fee up front, which was about half a million yen. Then when we sign the contract, we pay a portion of the construction cost, almost a third. And then, when the roof beams have been completed, about two months into contruction, we pay another third. The last payment is made when the house is completed. So that means before the money for the loan is transferred into our account, we have to pay two-thirds of the cost of the house on top of the money we had to shell out for the land. If we had bought a house already completed, then it would be no problem, but we’re having it built. In our case it isn’t that bad because we had initially planned to pay cash for everything, land and house, until we realized that we would have to increase our budget if we wanted to own a place that fit our minimum conditions and needs. So we do have enough cash to make all the payments. It’s just that we will be broke until the loan comes through. But what about people who don’t have that much cash on hand, people who are borrowing almost all of the money needed to build their houses? What if they’re buying a condo based on a design, meaning the actual structure won’t be completed for another year or two? Again, if you’re working with a developer or a builder, they will make everything as smooth as possible, since they will likely be working hand-in-hand with a lending institution. For people like us who are doing everything themselves, there are special intermediary loans called tsunagi-yushi that you can take out to make the initial and mid-term payments, but they require another screening process and often have higher interest rates. Since they’re usually paid back when the housing loan comes through the payments don’t last long, but during that period if the borrower is, say, paying rent, it could be a real burden, depending on how long it takes to put up the house or condo. So that’s another expense you might have to deal with if you’re building a house.
And while JA had virtually approved the loan, approval was dependent on certain other conditions that we hadn’t met yet, such as final receipt of the land. We had signed the contract for the land sale but had yet to make full payment on it because the real estate company and A-1 hadn’t secured permission to build on it from the relevant city departments. We had been assured that this was just a formality, but apparently it isn’t. The real estate office called us and said there might be a snag when A-1 puts in the application. The land we were buying was actually two plots of land, one about 200 square meters in size and another about 20 square meters in size. It was this smaller parcel that might cause problems. We had been concerned because there were no concrete stakes in the ground delineating the outline of the land, and we asked they be put in before we made our final payment. In going about this the realtor found, to no one’s surprise, that the boundaries weren’t really fixed. This small lot formed the southeast corner of our plot, which, as mentioned earlier, is triangular in shape and abuts a paved road on one side and an unpaved road on another. The roads, of course, are public property, and according local zoning rules our land falls into a “setback” situation, since the paved road is not the regulation 4-meters minimum in width and our property line on that side is actually slightly within the paved portion. If the city ever decided to widen the road to its proper size we would have to give up that sliver of our property, which isn’t a problem as long as the edge of our house is far enough away from the property line, and we made sure in the design that it was. The problem is that the property on the other side of the road isn’t clear, and getting a surveyor to come in and determine where it actually lies would cost money. When we heard this we worried that it might mean the city would not approve construction, and for at least one evening we fretted that all our plans were for naught. But actually this is a very common problem, and there are some estimates that up to 60 percent of the privately held land in Japan does not have clearly defined borders, which is why there are disputes when land is sold. It’s a relic of the post-war land redistribution plan, and supposedly the central government has been working to remedy the situation, but it’s a long, grueling process.
In the end, it meant nothing, and we weren’t really sure why the realtor had pointed out this discrepancy. These kinds of ambiguities were common in the real estate business, and if all were taken at face value nobody would be able to build a house. But we still had to wait for the city’s approval because it was suddenly the obon holiday and all public offices were closed for the week. So there was another delay.
Hi. Just saw your blog by way of Japan Times. I just bought a new house last year. Everything was in order so I didn’t have to go through all the pain you mentioned but I was still fascinated by the minutiae. I had originally planned to learn everything about buying/building a house before getting my own but we chanced upon a lovely new house that fit all our requirements and decided to take the plunge. In retrospect we could have saved about 3 million if we hard balled our lousy real estate agent and we insisted on getting documents for Flat35 and gotten a low rate fixed from the start. The pamphlet said the builders were applying for Flat35 Eco (a subset with better rates) but they told us they failed to get it. What they didn’t tell us was that the house qualified under Flat35 (not Eco) but application through Flat 35 was longer than via the Bank (I have very good credit history with no loans). They just wanted to get their money earlier, which was understandable but I could have used the info for some benefit.
BTW, your article above does not mention Flat35 at all. Didn’t you consider them? They have bridge (Tsunagi) loans as well.
What I originally wanted to do was to buy a unit at a former office building (high ceilings) in a good downtown location and refurbish it into a 2-3 LDK unit with movable walls for large parties. I used to live in such a place in Sydney. Sadly, I was told banks hardly give you loans for buying old property for reform, i.e. I need to pony up the money upfront and just apply for the loan once it’s built. I thought that was a bit too involved for my first project. Maybe after 10 years.
Anyway, I’m looking forward to reading your blog in depth. Cheers!
Yes, we did try for Flat35 through a housing loan company (not a bank; we probably wouldn’t have been approved), and it’s mentioned somewhere in here. We probably could have gotten it but the process would have taken a while with no guarantee and we wanted to get the loan tied down quickly, so we went with JA Bank, who guaranteed we’d get a loan right away. We pay a little more in interest and fees, but since we’re only borrowing about ¥7 million the difference is negligible.