Used mansion/Loan advice

[noonespecial]

Hi, Short-term lurker here.

My Japanese spouse and I recently started to look at buying a used Condo seriously.
We found a place that we both loved and, after a few weeks, decided to go ahead and buy.
It's a 3LDK around 80m2 (5min to the station), and the list price was roughly 34mil; after some bartering, they lowered the price to 32mil, and we signed a letter of intent.
The building is only about five years old, and the interior looks brand new.

My spouse has not been working long enough, so we had to apply for a loan under my income alone (I've got PR) I earn around 5mil/year
We don't have much savings so opted for a full loan (No down payment other than a small deposit of 500k)
The agent helped us apply for about 5-6 local banks, and after a week, we got an OK from 3 banks.
Two banks declined solely on the basis that I'm not Japanese, according to the agent, How common is this?
From the banks that accepted, one had the condition that my spouse signed as a guarantor. 0.7% floating.
Two banks accepted me as the sole loaner but at a higher interest rate. 0.8% floating.
None of the banks agreed to a flat35 type loan.
We finally agreed to the guarantor option.

I think we will be sitting at around 120 000Y a month (90 000+admin+repairfund+parking)
With a monthly net income currently of 460 000Y, is this too much? I keep worrying that this is too much or that there's something huge I'm missing.

We have a decent income but virtually no savings.
The original plan was to keep looking and save money until mid or late 2020 before buying.
I'm sorry if this post is a little all over the place, but I'd like to hear from others who've gone through something similar

[N00bster]

That doesn't look unreasonable at all to me. You are just a bit above 25% of your net income going into your flat. Most people pay more in rent.

If I were in your shoes I'd probably have done the same call (btw, 80m2 for 32 millions! Where is that?). Then I'd look at building an emergency fund as soon as possible before exploring the possibilities to invest further.

[noonespecial]

Thanks for your very swift reply.
You calmed my nerves a little.
I forgot to mention the loan is 35years
The building in Sendai and (I think) the price is mainly due to it being very close to one of the main rails so noisy surroundings.
With open windows or balcony, it's loud, but with the double sash glazed windows, I could barely hear much even when a freight train rolled through.
I guess it would bother other people
The rental place we live in now is next to a major road and trucks constantly vibrate the whole place and we have gotten used to it.

How does one pay off a loan earlier? Should I just save for 10-15 years and go tell the bank I want to pay it all off?
I apologize again for being all over, I've never done this before.
Meeting with the bank to do the final paperwork in a few days.

[RetireJapan]

As N00bster said, your plan does not look unreasonable (although I would be slightly concerned that you don't have savings or an emergency fund). What are you currently spending on housing?

As an alternative, I bought a used manshon a few years ago in Sendai. We got a great price (9 million when it should have been 12-3 million) for a 76m2 3LDK next to a station on the Senseki Line. I got a bank loan from Shonai Bank for 30 years at 0.5% floating rate.

The manshon was 25.5 years old at the time we bought it, which meant we did not qualify for the mortgage tax rebate (property must be under 25 years old or be certified as well-built).

Our total monthly costs (mortgage and manshon fees/water) are around 55,000 yen a month. Property taxes are about 6,000 yen a month.

So you could buy a cheaper place in Sendai and even if you spent a couple of million to renovate it to your liking (we put in extra windows) you'd still save a lot of money.

At the end of the day, housing is mainly an emotional decision. The key is to be aware of all the financial aspects before committing, and it seems as though you have done your homework and can afford your purchase if you really want the place.

[noonespecial]

An emergency fund will be on the top of my list after this goes through.
We're currently renting for about 75k/month.
Spent almost all our income the last eight years on making a new human, which as you can imagine, is not covered by NHI and expensive.
Now that our little miracle has turned one, I wanted to move into a family-friendly neighborhood.

I was thinking about getting an older place and renovating it, but I wasn't sure if the Morgage+renovating loan would be accepted.

Thank you for your thoughtful comment, Ben.
I'm sure I will have many more questions in the future, so I appreciate all the useful information you and others have compiled here.

[mighty58]

Sounds like things are working out all right at the moment, and it sounds you got your housing side down at a not-unreasonable cost. Congrats on the family as well.

Your longer-term goal now should be to increase the income side of the equation. I don't know what line of work you're in, but 5m/yr is pretty much exactly at the "average" level as far as Japanese salaries go, so there is likely room for growth there. As you long as you keep the expenses side relatively stable while your income goes up, you're all good.

[DragonAsh]

Slightly contrarian here, but I'm very concerned that's too much house for your income, particularly with no savings.
At the moment it is right up to the 'giri-giri' line with only you working, although it seems like you're both working now? Don't forget, you're also going to have property taxes (7-9,000 a month) plus other costs that crop up when you own vs rent. Your place is new-ish now, but don't be surprised if monthly renovation fees go up in a few years.

If one of you stops working due to kids / illness etc, things are going to go south very quickly.

It sounds like you've already moved forward, so at this point you're going to have to focus on keeping costs down and saving like a maniac. Otherwise you end up having to put emergency costs on the credit card at 15% interest.

Waiting at least another year to have a bit more of an emergency fund in place would have been preferable - new housitis makes one think that the place you're looking at is the only place you could ever be happy in, but the truth is there will always be good options if you're willing to be patient.

You're aware that things are a bit tight, so you're already ahead of the game. Good luck (and congrats on the family!)

[noonespecial]

Thanks for all the replies and advice.

Actually we haven't really moved forward by much.
We went with the brick&mortar 0.7% floating bank which we had been pre-approved for. (biggest bank in the north)
During that meeting, the deal kept getting worse and worse.
They wanted me to change my salary account to their bank. (Huge hassle for me since I've gotten used to my internet bank)
They wanted me to get a credit card through them that we had to use for my spouse's phone bill. (I think this was the deal-breaker for me, I don't want another credit card to keep track of, especially a card I MUST use)
I asked what would happen if we don't change the salary account and refuse to open a new credit card.
They said then they would change the deal to something like 1.2% floating.
At this point, we just looked at each other and walked out. No deal!

I told the agent we'll try to apply to my online bank instead, he informed us that he would be unable to help us apply for that so we had to try it by ourselves.

Well... after 2-3 weeks of sending in and fixing paperwork we where rejected. No idea why, they wouldn't say. We pass all the usual requirements.
I suspect they saw that I didn't have enough saved up maybe? I dunno.
This hit us pretty hard.
Time to get the Agents help again.
He found another brick & mortar bank (much smaller more local bank).
I got pre-approval there and signed all the documents for the real loan application a week ago.
The deal is actually pretty good, 0.65% floating (down from 0.85% because my job apparently counts as being a gov employee.
Still waiting for the official OK from the bank but the agent is optimistic, telling us it's pretty much a 99% done deal and he has already scheduled the sales contract with the seller.

I apologize again for the messy update, but this has been a messy situation.

[noonespecial]

Micro update
The second I posted that just now I found out we passed the banks finally review (本審査).

So the deal is 0.65% floating interest, 110% loan. the 500k deposit we get back after it's all done.
Spouse as the guarantor.
Need to open an account with this bank, but none of that changing of salary or credit-card nonsense.
So the plan is to just set up an automatic transfer of funds to this new bank account of like 150k a month, set and forget.

[DragonAsh]

Really really hope things turned out ok on this and COVID-19 hasn't hurt either of your incomes.