Real estate investment differs from other investments in that financial institutions offer dedicated real estate investment loans.Interest rate is one of the things to check when you make a real estate investment loan.A higher interest rate means more repayments, and a lower interest rate means less expenses and a higher yield, which improves cash flow.This time, I will explain what interest rates are, the market price of interest rates, and points to keep them low.
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what is interest rate
Interest is the price you pay for borrowing money for a certain period of time.Borrowing money by promising to pay an additional amount of ~% of the principal during a certain period of time.Financial institutions such as banks basically provide services in this manner. If the interest rate is 100% when borrowing 1 million yen for one year, the interest rate will be 3 yen in one year, so after one year, you will pay back 1 yen.
Floating interest rate, selective fixed interest rate, fixed interest rate for the entire period
There are three main types of interest rates for real estate investment loans: variable interest rates, selective fixed interest rates, and fixed interest rates for the entire period, and each has advantages and disadvantages.Interest rates vary from financial institution to financial institution.
Floating interest rate
There is a review once every six months, and the repayment amount is reviewed once every five years.It is often lower than fixed interest rates, and currently Japan has a zero interest rate policy, so if this situation continues, the loan repayment amount will be lower than fixed interest rates.However, since the repayment amount fluctuates according to the interest rate that fluctuates due to the influence of the bond market, it may be higher than the fixed interest rate, making it difficult to make a repayment plan.
Selective fixed interest rate
Even if the interest rate rises due to changes in national policies or economic conditions, the interest rate will remain fixed for a certain period of time.You can choose the fixed period from 1, 3, 5 years, etc. After a certain period of time, you can choose to continue with the fixed interest rate or the variable interest rate again.The advantage is that you can shift to the direction that you think is optimal by looking at the situation of monetary policy.Interest rates may have increased over time, and the longer the fixed period, the higher the interest rate.
Fixed interest rate for the whole term
The advantage is that the interest rate does not change during the repayment period, making it easier to plan repayments.Since it is often higher than the floating interest rate, if the zero interest rate policy continues, the total repayment will be higher than the floating interest rate.
Interest rate market by financial institution
mega bank, city bank
Bank of Tokyo-Mitsubishi UFJ, Mizuho Bank, Sumitomo Mitsui Banking Corporation, and Resona Bank have interest rates of around 1%.There are branches all over the country, and properties in areas far from the residence are also eligible for financing.However, the examination of the loan is the strictest, and it is evaluated whether you have enough self-financing, whether you have worked for a long time at a stable place of employment, and whether you have financial assets.
Local bank
In many cases, it is a loan condition that you live in the prefecture where the bank's head office is located and the property you plan to purchase is also in that area.In addition, there is a difference in whether or not they are focusing on real estate investment loans, and the interest rate ranges from 1% mid to 4% mid.However, even if the interest rate is high, there are cases where you can choose a long-term borrowing period, and you can also choose a bank that is advantageous in terms of cash flow.
credit union, credit union
If you have a stronger sense of locality than a regional bank and have a good relationship with the financial institution on a regular basis, you will be more likely to be treated preferentially.The conditions are about the same as those of regional banks, and the interest rate is in the middle of 2%.
Japan Finance Corporation
Financial institutions under the jurisdiction of the Ministry of Finance have a fixed interest rate of 1.2% to 1.9%.Since the Japan Finance Corporation does not have the main purpose of making profits, it may pass the examination even if it fails at other financial institutions.In addition, there is a tendency to emphasize business feasibility rather than attributes and properties, and the maximum borrowing limit has been raised as a preferential treatment for women and the elderly, and the borrowing period is up to 15 years, which is very different from other financial institutions.
How to keep interest rates low?
By going through a real estate company that has a close relationship with the bank, you may be able to keep the interest rate lower than going around the bank yourself.It is important to choose a bank for a real estate investment loan, but each financial institution has different screening standards, so it can be difficult to know which bank is best for you, and it can be difficult to find a good agent if you do not have connections.In that case, going through a real estate company that has a large track record of loans makes it easier for even first-timers to connect smoothly to the person in charge. It doesn't need to be, and it introduces a bank that is likely to pass the loan based on the customer's attributes.
Also, in order to borrow a real estate investment loan, the range of financial institutions you can choose from will expand by showing your attributes and properties as well as possible.Therefore, if you have multiple credit cards with high limits, it is important to cancel them, save money, and prepare a business plan.Depending on how much you can create a situation where you can be trusted by financial institutions, the financial institutions you can choose will change, and as a result, interest rates will also be affected.
Related article:Before you start investing in real estate, what you should know about loan screening criteria and how long is the screening period?
Summary
Interest rates vary and can be negotiated with each financial institution.However, since it is difficult for beginners who want to start real estate investment to negotiate interest rates with financial professionals, it is more likely that negotiations will go well with a real estate company with a proven track record as a partner.When choosing a real estate company, it is a good idea to choose a company that manages many properties, has a long track record, and can see the face of the staff.
At Rich Road Co., Ltd., we will consistently support all aspects of investment real estate, from complete beginners to experienced people, from a wide range of real estate selection, loan consultations, post-purchase management, and renovations.
