Flat 35 vs Private Bank Loan: Which Japanese Mortgage is Best?

Note: This content is specific to the Japanese property market.

Japan offers the lowest mortgage interest rates in the world. When buying a home here, you generally face a binary choice: the government-backed Flat 35 or a Private Bank Loan.

For foreigners living in Japan, this choice often depends on your visa status and employment type.

1. Flat 35 (The Government Option)

The Flat 35 is securitized by the Japan Housing Finance Agency (JHF). It guarantees a fixed interest rate for the entire 35-year term.

• Interest Rate: Around 1.8% - 2.0% (in 2025).
• Pros:
  • Fixed Rate: Total peace of mind. Your payment never changes.
  • Easier Approval: They focus on the property quality rather than just your job stability. Friendly to freelancers, business owners, and sometimes foreigners without Permanent Residency (PR).
  • No Prepayment Penalty: You can pay it off early for free.
• Cons: Higher rate than private banks. Life insurance (Danshin) is not always free.

2. Private Bank Loans (The Cheap Option)

Mega-banks (MUFG, SMBC) and Net-banks (Au Jibun, SBI) offer aggressive Variable / Floating Rates.

• Interest Rate: Extremely low, around 0.3% - 0.5%.
• Pros:
  • Massive Savings: Paying 0.4% interest is almost free money.
  • Insurance Included: Usually includes Group Credit Life Insurance (Danshin) for free.
• Cons:
  • Interest Rate Risk: If the Bank of Japan raises rates, your payment goes up.
  • Strict Screening: They require high job stability (traditional "salaryman" jobs) and usually demand Permanent Residency (PR) for foreigners.

Verdict for Foreigners

• Do you have PR and a stable corporate job? Go for a Private Bank Variable Loan. The 0.4% rate is unbeatable mathematically.
• Are you self-employed, on a non-PR visa, or risk-averse? The Flat 35 is your safety net. It’s easier to get approved and protects you from future rate hikes.

👉 Japanese Mortgage Calculator: Flat 35 vs Variable