Young Japanese opting for 50-year loans amid soaring housing prices

TOKYO — The use of housing loans with terms of up to 50 years, far longer than the standard 35-year term, is spreading among younger generations in Japan amid a rise in housing prices.

Young Japanese are buying the properties of their choice by reducing monthly payments, but a longer loan term raises the total repayment amount and keeps company employees paying even after they retire.

The risk of interest rate fluctuations, caused by the Bank of Japan's monetary policy shift, is another thing to worry about.

In July, PayPay Bank began to offer 50-year loans, with 70 percent of people in their 20s and 49 percent of people in their 30s selecting repayment periods of more than 35 years to 50 years.

Other internet banks and regional banks are also providing longer-term loans, targeting people in those age groups. In principle, a customer must complete the payment by age 80.

According to calculations by Takashi Shiozawa of housing loan service provider MFS Inc., if a customer borrows 60 million yen at an annual interest rate of 0.75 percent, the monthly payment for a 35-year loan will be about 160,000 yen and the total amount of interest paid will be about 8.23 million yen.

For a 50-year loan, the figures will be about 120,000 yen and 11.97 million yen, respectively, he said.

A 50-year loan "will lower your monthly repayment, giving you more free money," Toshiaki Nakayama of the Lifull real estate group said.

He added that using the extra money for investment is an option.

"It's important to consider your medium- to long-term life plan before borrowing," Nakayama said, citing risk factors such as illness and difficulty in paying due to a job change.

© KYODO