Delay in the mortgage for our house
02 Nov 2025 | #japan | #housing | #moneyWe bought land in Tokyo last year and just finished building our house. We are financing both the land and the house with a mortgage, and just run into some delays with the mortgage. This won’t affect much, but it makes the interest on the bridge loan about 50,000 yen higher, and makes the mortgage of the house start later.
The bank
I covered how we chose our bank in the post about buying the land, and we had to go with the same bank for the house portion of the mortgage too. Technically the land and house portions are two separate loans with different start and end date, and potentially different options (e.g. variable vs fixed rate, or the included life insurance options). We kept both of them the same.
The amount
When buying the land we paid appr. 7% extra on top of the price of the land for the various fees, and we included that in the mortgage. (This is very common in Japan, and while it means that you start under-water on your mortgage, since the bank can come after your other assets if you default, many banks allow it.)
For the house portion of the loan we also had extra costs we wanted to include:
- 35.6 million yen for the house, paid to Ichijo
- 1.2 million yen for water connection works (our land used to be big and got split into two, and our half ended up without a connection to the water system)
- 2.66 million yen for the outside construction work (this is done by a company different from Ichijo and I will write about it separately)
- 913,000 yen for the mortgage fee (same 2.2% as with the land mortgage)
- 300,000 yen for registration and taxes (Ichijo’s initial estimate)
- 150,000 yen for bridge loan interest (Ichijo’s initial estimate)
- 195,950 yen for home insurance (Ichijo’s initial estimate, we ended up paying 175,633 yen
(I will post a proper breakdown on all the costs once everything is finalized.) This meant that other than the 35.6 million yen for the house, we had 5.4 million yen extra costs that we wanted to include in the loan.
During the loan pre-approval we made sure to apply for an amount that can include these. However this resulted in some surprise changes which also led to a delay in the mortgage payout for our house.
Types of loans
In my post on bridge loan I touched on this briefly (as back then I thought it was a minor thing and won’t lead to a delay), but we ended up changing the mortgage type halfway through the construction.
Ichijo-partnership mortgage
Since our bank (SMTB) and Ichijo has a partnership, initially we got the Ichijo-partnership mortgage (一条工務店との提携ローン) for the house. The only difference is the payout schedule: Ichijo wants to get paid 1/3rd in the beginning, 1/3rd in the middle, 1/3rd at the end of the construction. This partnership loan would have our bank pay 2/3rd at the middle, and 1/3rd at the end, limiting the bridge loan to 1/3rd of the amount during the first half of the construction.
For our case (house price at 35.6 million, bridge loan interest at 2.025%) this would have meant a bridge loan interest payment of about 50,000 yen.
However this type of mortgage came with a condition: the overall amount can only be up to 110% of the price of the house, so only an extra 3.56 million yen for extra costs. This would have left us with 1.8 million yen to be paid out of pocket. We could have done this, but having this included in the mortgage at less than 1% interest rate means we can invest it and make more than that. So we asked to have it included. Which made us switch to the normal mortgage
Normal mortgage
This only pays out once the house is finished and registered at the Legal Affairs Bureau (法務局) on the the real estate registry (不動産登記簿上). We were initially told that this registration will be fast (few days) but due to the Legal Affairs Bureau currently being very busy, it will take them more than 3 weeks, which delays the mortgage finalization (and payout date) as well. The bank’s explanation is that they can only give us money once they confirmed the collateral, which is when the house is recorded in the real estate registry. With the Ichijo-partnership mortgage, Ichijo acts as guarantor that the house is indeed there, but the normal mortgage needs the official registration to finish before they can use it as collateral.
On the bright side, this means that we could push back the signing of the mortgage contract to be after our official move-in date, which means the bank will handle registering our new address in the real estate registry, and we won’t have to deal with that later.
Ichijo used the bridge loan to get their final payment, so the house handover could proceed. So the only downside of this delay is that the bridge loan will be paid back a month later resulting in additional interest to be paid.
Timeline
Looking back now, maybe going with the Ichijo loan would have been better. However we didn’t know about all the delays at that time. This is how the timeline of the events looked like:
-
In July we got the question whether to change from the Ichijo-partnership to the normal loan. The Ichijo-partnership loan would have had a bridge loan interest of 50,000 yen.
- The delivery date was estimated to be early October. So with the normal mortgage (assuming a fast registration at the Legal Affairs Bureau), the bridge loan interest was expected to be 160,000 yen. We decided to go with this.
- The construction had some delays (related to Tepco) so the completion got pushed back to end of October. This pushed the bridge loan interest to 190,000 yen (still assuming fast registration).
- Then the mortgage delay caused by the Legal Affairs Bureau is pushing the bridge loan repayment back to end of November making the overall interest to 240,000 yen (bigger jump since Ichijo charged the last 1/3rd of the price to the bridge loan).
In the end was this a right decision?
From the timeline it’s clear that things changed as we went along, and the available information at the time of making the decision to switch from the Ichijo-partnership to the normal mortgage were different. But overall, was this still the right decision?
On the surface we are spending an extra 190,000 yen in bridge loan interest just to have an extra 1.8 million yen loan. However the Ichijo-partnership mortgage would have started earlier and would have incurred its own interest (0.72%). Assuming the bank would have let us delay the principal payments until the house was done, this would have meant an additional interest of about 70,000 yen (paid on the mortgage). So now the current setup is only 120,000 yen worse than the alternative.
But does the 1.8 million yen loan worth the 120,000 yen upfront cost?
At the current, 0.72% interest the 1.8 million yen will correspond to a monthly payment of 4,850 yen (=PMT(0.0072/12,35*12,-1800000)).
With the normal loan: I get 1.8 million yen today, but need to pay 120,000 yen for the bridge loan interest. So I have 1.58 million left to invest. At 5% nominal rate of return (conservative) that will become 8.7 million yen in 35 years (=1580000*1.05^35).
Meanwhile staying with Ichijo-partnership loan would mean a monthly payment that is 4,850 yen less. If I invest this money each month (with 5% average return) this will become 5.5 million yen in 35 years (=FV(0.05/12, 35*12, -4850, 0, 0)).
So switching to normal mortgage is better. But what if the interest rate on the loan rises? The BOJ has been talking about raising rates all year long. Let’s see how the final outcome changes with different interest rates:
| Average interest rate* | Monthly payment on the 1.8 million yen | Future value of investing these monthly payments after 35 years |
|---|---|---|
| 0.72% | 4,850 yen | 5,509,650 yen |
| 2% | 5,963 yen | 6,774,212 yen |
| 3% | 6,927 yen | 7,870,057 yen |
| 3.72% | 7,670 yen | 8,714,372 yen |
| 5% | 9,084 yen | 10,320,693 yen |
*: the average interest rate is defined as the equivalent fixed rate for the whole period that would result in the same outcome.
Comparing this to the 8.7 million yen final value of the normal mortgage, it looks like as long as the average interest rate on the loan stays below 3.7% then making the switch was worth it.
One could argue that the interest going above 4% would need sustained high inflation, in which case the nominal rate of return would likely exceed 5%, so I’m pretty comfortable with the decision even with the unforeseen delays.