Variable, fixed-period and fully fixed
Flat 35 is a fully fixed-rate loan offered by private lenders together with the Japan Housing Finance Agency. The home must meet the agency’s technical standards, and highly energy-efficient homes can get a lower rate for the first years under schemes such as Flat 35S. Rates change monthly and are published on the official site.
| Type | How the rate is set | Characteristics |
|---|---|---|
| Variable (hendo kinri) | Usually reviewed every six months, linked to the bank’s short-term prime rate | Lowest starting rate and most popular; rises when the policy rate rises |
| Fixed-period (kotei kikan sentaku-gata) | Fixed for a chosen period (3, 5, 10 years, etc.), then re-selected at the prevailing rate | Stable during the period; payments can change sharply when it ends |
| Fully fixed / Flat 35 | Fixed at the starting rate for up to 35 years | Same payment to the end; starting rate higher than variable |
A rising-rate phase: Bank of Japan moves 2024–2026
Variable rates are often linked to the Bank of Japan’s policy rate and banks’ short-term prime rates. The table below records past decisions only and is not a forecast.
When the policy rate rises, many banks raise their short-term prime rate and variable loan rates follow a few months later. Long-term fixed rates are driven more by long-term government bond yields than by the policy rate. Which type turns out cheaper depends on future rates and cannot be known in advance, so it is important to calculate what your payment would be if rates rose.
| Date | Policy rate (target for the uncollateralised overnight call rate) |
|---|---|
| March 2024 | Negative rates ended, around 0–0.1% |
| July 2024 | Around 0.25% |
| January 2025 | Around 0.5% |
| December 2025 | Around 0.75% |
| June 2026 | Around 1.0% |
| September 2026 | Around 1.25% |
Based on Bank of Japan monetary policy statements (through the September 2026 decision). Check the Bank’s announcements for later decisions.
Equal payment vs equal principal
Equal principal pays down the loan faster and costs less interest overall, but the early burden is heavier. Equal payment is the norm in Japan, and some lenders do not offer equal principal at all.
| Method | Monthly payment | Example: ¥30m, 35 years, 1.0% |
|---|---|---|
| Equal payment (ganri kinto) | Same from start to finish (unless the rate changes) | ¥84,686 a month, total interest about ¥5.57m |
| Equal principal (gankin kinto) | Highest at first, then falls | First month ¥96,429 → last month about ¥71,500, total interest about ¥5.26m |
Illustrative figures assuming no bonus repayments and an unchanged rate for 35 years.
The 5-year rule and 125% rule for variable loans
Many Japanese variable-rate loans (equal payment) include safeguards so payments do not jump suddenly when rates rise. The extra interest does not disappear, however.
Example: ¥30m, 35 years, starting rate 0.8% → ¥81,918 a month If the rate is 3.0% from year 6, the payment recalculated over the remaining 30 years is ¥110,506 125% rule: it rises only to ¥102,398, and principal repayment slows by the difference
- 5-year rule: The rate may change every six months, but the monthly payment is recalculated only every five years. In between, more of each payment goes to interest and less to principal.
- 125% rule: At each five-year reset, the new payment can rise to at most 1.25 times the previous one.
- Unpaid interest (miharai risoku): If rates rise so much that interest exceeds the payment, the shortfall becomes unpaid interest and may have to be paid in a lump at maturity together with the remaining principal.
- Loans without these rules: Some lenders change the payment whenever the rate changes, with no 5-year or 125% rule. Check before signing.
Group credit life insurance (danshin)
Most private home loans require group credit life insurance (dantai shin’yo seimei hoken). If the borrower dies or becomes severely disabled, the insurance pays off the remaining loan. The basic premium is usually built into the interest rate.
Riders covering cancer or three/eight major illnesses typically add around 0.1–0.3 percentage points to the rate (varies by lender). Flat 35 rates are quoted including the agency’s own group credit life insurance. If health issues make it hard to qualify, options include “wide danshin” with looser underwriting, or Flat 35, where the insurance is not mandatory.
Because danshin may reduce how much separate life insurance you need, review your family’s insurance when you take out the loan.
Housing loan tax credit: moving in during 2026
The FY2026 tax reform extended the housing loan credit for five years, to move-ins through December 2030. It deducts 0.7% of the year-end loan balance from income tax, with any unused amount deducted from resident tax up to ¥97,500.
New homes moved into from 2028 generally need to be ZEH level or better, and new homes in high disaster-risk “red zones” are excluded. The first year requires a tax return; from the second year it goes through year-end adjustment.
| Home type | New / resale-renovated (move-in 2026–2027) | Existing (used) home (move-in 2026–2030) |
|---|---|---|
| Certified long-life / low-carbon | ¥45m (child-rearing/young couples ¥50m), 13 years | ¥35m (child-rearing/young couples ¥45m), 13 years |
| ZEH-level energy-efficient | ¥35m (¥45m), 13 years | ¥35m (¥45m), 13 years |
| Meets energy-efficiency standard | ¥20m (¥30m), 13 years | ¥20m (¥30m), 13 years |
| Other homes | Generally not eligible | ¥20m, 10 years |
Amounts are the maximum loan balance eligible for the credit. Child-rearing/young-couple households have a child under 19 or a spouse under 40. Requirements include total income of ¥20m or less and floor area of 50㎡ or more (40㎡ or more if income is ¥10m or less, but the child-rearing top-up does not apply under 50㎡). Limits for both new and existing homes follow National Tax Agency answers No.1211-1 and No.1211-3 (law as of 1 April 2026).
Prepayment, refinancing and debt-to-income ratio
Prepayment lowers the year-end balance and therefore the housing loan credit. So when the loan rate is below the 0.7% credit rate, some people hold off on prepaying during the credit period. Either way, keeping an emergency fund of several months’ living costs is basic.
Example: ¥30m, 35 years, 1.0% (¥84,686 a month), prepay ¥3m after 5 years Term reduction term shortened by about 3 years 10 months, interest down about ¥970,000 Payment reduction ¥84,686 → ¥75,036 a month, interest down about ¥470,000
- Term reduction (kikan tanshuku-gata): Keep the monthly payment and shorten the term. Saves more interest.
- Payment reduction (hensai-gaku keigen-gata): Keep the term and lower the monthly payment. Saves less interest but frees up monthly cash.
- Refinancing (karikae): Switching to a loan from another lender. Guarantee fees, administration fees and registration costs can run to several hundred thousand yen or more, so check whether the rate gap, remaining balance and remaining term make it worthwhile. Refinancing can also change your housing loan credit.
- Repayment ratio (hensai hiritsu): Annual repayments ÷ gross annual income. Flat 35 allows up to 30% for income under ¥4m and 35% for ¥4m or more. Separately from approval, many suggest about 20–25% of take-home pay as a comfortable level.
FAQ
Which is better, variable or fixed?
It depends on future rates, which cannot be known in advance. With a variable rate you bear the risk of higher payments and interest if rates rise; with a fixed rate you pass that risk to the lender in exchange for a higher starting rate. A common approach is to calculate payments if rates rose by 1–2 points and check you could manage them.
Can foreigners get a home loan in Japan?
With permanent residency, many lenders assess you much like a Japanese citizen. Without it, lenders often add conditions such as a Japanese or permanent-resident spouse, and Flat 35 is in principle limited to permanent and special permanent residents.
What should I watch for with bonus repayments?
If bonuses fall or stop, the burden grows, so many borrowers now plan on monthly payments only. Lenders often cap the share repaid through bonuses (40% for Flat 35).
Can I prepay while receiving the housing loan credit?
Yes. But the credit is based on the year-end balance, and if prepayment makes the total repayment period less than 10 years from the original loan date, you lose the credit from then on.
Basis and sources
- Japan Housing Finance Agency — Flat 35 and group credit life insurance
- Flat 35 official site (Japan Housing Finance Agency) — monthly rates and lending criteria
- Bank of Japan — Monetary policy meeting decisions
- National Tax Agency No.1211-1 — Housing loan tax credit for new homes
- National Tax Agency No.1211-3 — Housing loan tax credit for existing (used) homes
- Ministry of Land, Infrastructure, Transport and Tourism — Housing tax measures (FY2026: credit extended five years, used homes expanded)