Tokyo Bank Introduces Controversial 50 Year Loan

Sep 05, 2024 | News On Japan

TOKYO - Buying a home is often considered the biggest purchase of one’s life. A mortgage is essential, with the standard repayment period being 35 years. However, Keiyo Bank has caused a stir by becoming the first regional bank in the Tokyo metropolitan area to introduce a 50-year mortgage plan.

We asked people on the street for their honest opinions about continuing mortgage payments for 50 years.

A person in their 20s commented, "If you start working right after high school and get married around 20, the long working period makes it easier for people in that situation to take the plunge."

Another person in their 20s said, "The reduced monthly payments are beneficial for younger generations."

The primary advantage of a 50-year mortgage is the reduction in monthly payments. For example, if you purchase a new Y100 million apartment in Tokyo, the monthly payment with a 35-year mortgage would be approximately Y270,000. With a 50-year mortgage, this amount drops to about Y199,000, saving around Y70,000 per month.

There’s a reason why the example used involves a Y100 million price tag. The average price of a new apartment in Tokyo has exceeded Y100 million due to rising property values.

A person in their 30s living in a rental said, "Prices are high in certain areas, especially in Tokyo."

Another person in their 30s added, "A house is different from buying a car. Given the frequent earthquakes lately, I would want to be cautious before making such a big decision."

We asked a representative from Keiyo Bank’s loan department about the bank’s intentions behind introducing the 50-year mortgage plan.

The representative explained, "The 50-year repayment period allows for lower monthly payments, making it easier for younger people to purchase properties. Our target audience includes those in their 20s and early 30s, as the loan must be fully repaid before the borrower turns 80."

The conditions for obtaining a 50-year mortgage include the borrower being under 80 years old at the time of full repayment and the purchase of a new home within Chiba Prefecture or its surrounding areas.

However, the prospect of taking on a 50-year mortgage still raises concerns, so we asked people on the street for their thoughts.

A woman in her 20s remarked, "It’s quite long. I’d rather pay off the loan quickly, so the reduced monthly payment doesn’t make a big difference."

A man in his 20s commented, "While a longer loan period provides security in old age, the additional payments over time are a concern."

We also asked an older generation what they thought about the 50-year mortgage plan if they were in their 20s.

A person in their 40s currently repaying a 35-year mortgage said, "If you buy a house in your 20s, it’ll be quite old after 50 years, and you might want to move or buy a new one. Given that risk, I’d prefer a loan of around 30-odd years."

Another person in their 40s living in a rental commented, "50 years… In this unpredictable era, I can’t even foresee what tomorrow will bring, let alone know if I’ll still be alive in 50 years. It’s too far into the future to make such plans."

We then asked a financial planner for their insights. Fuji TV’s deputy editor and commentator Yuichi Tomita, who holds a financial planning qualification, explained the benefits of the 50-year mortgage.

Tomita said, "Reducing the monthly payments lowers the burden on income, making it easier for younger generations with lower incomes to purchase homes. It also opens up more options for properties and allows the saved money to be used for other life events, such as childbirth and education."

However, extending the loan period by 15 years means that if you borrow Y100 million, the total repayment amount will increase to Y119 million. This results in an additional Y6 million in payments compared to a 35-year mortgage.

Finally, we spoke to a person in their 30s who took out a 50-year mortgage to purchase a house.

The homeowner explained, "Out of all the different types of mortgages, the home loan offers the lowest interest rate. By choosing this loan, we can keep more cash on hand. Although the total borrowed and repaid amounts are higher, the amount of money we retain is also greater. We deliberately chose the 50-year loan because we wanted to borrow for a longer period."

Given that repayments will continue even after retirement, it is crucial to plan your finances for the future in detail.

Source: FNN

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