This article is part of Zagdim’s Japan property series. It explains how the three mortgage rate types in Japan work and what each one trades off, for readers comparing home loans before buying property in Japan.
No rate type is cheaper in every situation. The three differ in who carries the risk of rising rates and when that risk shows up in your repayments. A fully fixed loan (全期間固定金利型) sets the rate for the whole term when you borrow (for Flat 35, the rate at the time funds are paid out), at the price of a rate that is generally higher than a variable one. A fixed-period loan (固定金利期間選択型) locks only an initial period, and when it ends you choose again at the rates of the day. A variable-rate loan (変動金利型) has a rate that is adjusted periodically, while the repayment amount is adjusted with a time lag; if rates rise sharply, unpaid interest (未払利息) can arise.
As of September 2026, the official materials reviewed show no different rules for foreign borrowers when choosing a rate type. Before choosing, get the bank’s written explanation and confirm what the rate is based on, when the repayment amount is adjusted, and how much more you would pay each month if rates rise.
Why Is the Mortgage Rate Type Hard to Choose?
A quote shows only today’s rate. What decides your future cost is the adjustment rules in the contract. Two loans both labeled “variable” can differ in the reference date on which the bank reviews the rate and in how it recalculates repayments. Two loans both labeled “fixed” may be fixed for the whole repayment term or for only the first few years.
Rate news adds to the confusion. The Bank of Japan’s policy rate has stood at around 1.25% since September 24, 2026, but the policy rate is a target for the overnight interbank lending rate, not a mortgage rate. How the policy rate has been raised and what that means for existing mortgages is covered in the main article on whether foreigners can get a mortgage in Japan.
As for what other borrowers choose: in the Ministry of Land, Infrastructure, Transport and Tourism (国土交通省) survey, variable-rate loans made up 83.5% of new private mortgage amounts originated in fiscal 2024. In a January 2026 online survey by the Japan Housing Finance Agency (住宅金融支援機構, the body that offers Flat 35 together with private lenders), 75.0% of respondents who borrowed between April and September 2025 chose a variable rate. The two figures rest on different statistical bases. They reflect what past borrowers chose, not a judgment about future rates.
Fully Fixed Loans: What Is Locked In, and What Does It Cost?
A fully fixed loan locks the rate for the entire repayment term, so the repayment plan is set when you borrow. The price is twofold: the rate is generally higher than a variable rate, and repayments do not fall if market rates drop.
The Japan Housing Finance Agency’s Flat 35 (フラット35) is of this type, and applicants must be Japanese nationals, permanent residents (永住者) or special permanent residents (特別永住者). Two points are worth clarifying first:
- The rate is locked at payout, not at application. The rate that applies is the one on the day funds are received, not the day you applied, and the payout date is set by the lending institution. Rates for new payouts are published monthly, so the applicable rate can change between application and payout.
- Term and loan-to-value ratio change the rate. Taking October 2026 payouts with the institution-group credit life insurance (団体信用生命保険) as an example, the rates most commonly used by lending institutions were: 3.940% a year for terms of 21 to 35 years with a loan-to-value ratio above 90%; 3.510% a year for Flat 20 (フラット20, terms of 15 to 20 years) at 90% or below; and 4.100% a year for Flat 50 (フラット50, terms of 36 to 50 years, limited to long-term quality housing and similar) at 90% or below. Choosing the spouse joint-life insurance (デュエット) adds 0.18%, and choosing the institution insurance with new three major diseases cover adds 0.24%.
These are the rates most commonly used within the range each lender offers. They do not mean anyone can obtain them. This paragraph was updated on October 3, 2026 with the October rates published by the Japan Housing Finance Agency (September: 3.570%, 3.140% and 3.700% respectively).
Fixed-Period Loans: What Happens When the Fixed Period Ends?
With a fixed-period loan, you choose at signing a fixed period such as 2, 3, 5 or 10 years. During that period the rate and repayment amount do not change, and there is no unpaid-interest risk of the kind that affects variable loans. Generally, the shorter the fixed period, the lower the rate.
You cannot switch to another rate type partway through the fixed period. When the period ends, you can move to a variable rate or choose another fixed period at the rates then prevailing. Some products also reset the rate on a regular schedule after the first fixed period, for example every 3 years.
This means the repayment amount after the fixed period cannot be known when you first borrow. If rates have risen, the rate after expiry can jump and repayments rise with it. What procedures apply at expiry, and whether a fee is charged for choosing a fixed rate again, are items the bank must explain before signing (see “What Must the Written Explanation Cover Before You Sign?” below).
Variable-Rate Loans: How Does the Rate Move, and When Do Repayments Follow?
With a variable-rate loan (変動金利型), the interest rate and the monthly repayment are adjusted separately.
- Rate: Generally reviewed every six months, based on a reference rate (基準金利) stated in the contract. How much your applicable rate moves when the reference rate moves is set by the contract.
- Reference dates depend on the product: For example, Sony Bank (ソニー銀行) states in its explanation that its reference dates are May 1 and November 1 (viewed September 30, 2026). The Central Council for Financial Services Information (金融広報中央委員会) used, in 2018 materials, the prime-rate levels of April and October each year as an example.
- Repayment amount: With equal principal-and-interest repayment (元利均等返済, where each payment is the same and the split between interest and principal shifts as rates change), the repayment amount is generally recalculated every 5 years. With equal-principal repayment (元金均等返済), it generally adjusts as the rate moves.
- Time lag: The Bank of Japan’s April 2026 report observed that when the repayment amount is changed after the 5-year point, the reference date is mostly in October, and the change shows up in repayments from December onward.
What index the reference rate follows also depends on the product. According to the Central Council’s 2018 explanation, banks offer variable-rate loans linked to the short-term prime rate (短期プライムレート), and trust banks also offer types linked to the long-term prime rate (長期プライムレート). There is currently no public official material on how each bank’s mortgage reference rate is converted from the prime rate.
Current prime-rate levels: according to Bank of Japan statistics, as of September 11, 2026, the most frequent value of the short-term prime rate at major city banks was 2.375% (from August 3, 2026; the previous level was 2.125% from February 9, 2026), and the long-term prime rate was 3.40% (from September 10, 2026). These figures do not yet reflect the policy rate increase of September 18, 2026, and whether banks adjusted afterward was not yet known on the date checked. The prime rate is set independently by each bank and is not itself a mortgage rate.
How Much Did Repayments Rise for Existing Borrowers After Rates Went Up?
The Bank of Japan’s April 2026 report, using mortgage data from regional banks, observed that the applicable rate on most variable-rate loans had risen above 1%. Among loans whose repayment amount was changed, increases in fiscal 2024 were mostly 1,000 to 3,000 yen a month. For changes made in fiscal 2025, the share of loans with increases of 4,000 to 6,000 yen a month also rose (this is the Bank’s trial calculation, assuming the repayment amounts on all loans are recalculated only every 5 years).
Because the repayment amount on most loans is recalculated only every 5 years, about 20% of loans see a repayment increase in any given year. Under the rate rises through fiscal 2025, most loans had a repayment increase of less than 8%. The report was published in April 2026, before the rate increases of June and September 2026, so it does not cover their effect and cannot be used to project what comes next.
Do the 5-Year Rule and 125% Rule Reduce the Interest You Pay?
No. These rules soften the timing and size of changes in the repayment amount. They do not reduce the interest owed.
The 5-year rule (5年ルール) keeps the monthly repayment fixed for 5 years from the borrowing date. The 125% rule (125％ルール) caps the recalculated repayment at 1.25 times the previous amount. The Bank of Japan calls them shock-absorbing measures (激変緩和措置): the increase in burden is cushioned in the short term, but once the repayment amount is changed, the change reflects the cumulative effect of interest rate changes over the preceding 5 years.
Whether a product has these rules and how they are calculated depends on the product, and they are not required by law. For example, Sony Bank states that it does not use these two rules and recalculates repayments in line with any rise in the applicable rate, so it does not push the burden to the final payment. Rakuten Bank (楽天銀行) states that it uses both rules but only for equal principal-and-interest repayment, and that the monthly repayment after a change under equal-principal repayment has no cap (both viewed September 30, 2026).
**Example: A variable-rate borrower paying 80,000 yen a month**
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A borrower has a variable-rate loan with equal principal-and-interest repayment, a contract that includes the 5-year rule and 125% rule, and an initial monthly repayment of 80,000 yen. The Japanese Bankers Association (全国銀行協会) uses this example:
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- **First 5 years:** The monthly repayment stays at 80,000 yen. The rate is reviewed every six months. When rates rise, the repayment stays the same, but the part used to pay interest grows. – **When interest exceeds 80,000 yen:** The excess becomes unpaid interest. During this period, the amount of each payment going to principal is zero, and the loan balance stops falling. – **From year 6:** The repayment amount is recalculated, capped at 100,000 yen a month, which is 1.25 times 80,000 yen. – **When the interest portion exceeds 100,000 yen:** Unpaid interest continues to arise after year 6. Unpaid interest generally does not itself accrue interest, but it keeps accumulating until the end of repayment unless paid separately from regular repayments, and after regular repayments end there may still be a loan balance made up of unpaid interest.
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How unpaid interest is settled differs by financial institution. This borrower needs to confirm whether the contract includes these two rules, how unpaid interest is settled, and ask the bank to calculate the monthly repayment at a rate higher than the current one.
What Does It Cost to Change Course Midway: Early Repayment or Refinancing?
You can change course, but each option has a cost, and amounts depend on the product and bank.
Early repayment (繰上返済) means using savings or a lump sum of income to pay down principal. For equal principal-and-interest loans there are two methods: the shorter-term type (返済期間短縮型) applies the money to principal of later installments, shortening the repayment period; the lower-payment type (返済額軽減型) keeps the term and reduces each payment. According to the Central Council’s 2018 explanation, the earlier in the loan and the longer the term, the more of the future interest you would otherwise have paid is saved.
Banks must explain early-repayment fees before signing, and for fixed-period loans they must also explain the fee or settlement amount (精算金) for early repayment during the fixed period. Flat 35 does not charge early-repayment fees.
Refinancing (借換え) amounts to applying for a new mortgage with a financial institution, and incurs administrative fees, taxes and the fee of a judicial scrivener (司法書士, a professional who handles registration on commission). A financial planner (FP) on the Japanese Bankers Association’s website estimated the cost at around 3% to 5% of the loan balance; this is an individual’s estimate, not official statistics, and actual costs depend on the bank, the loan balance, mortgage registration and other factors. The same planner also warned that when refinancing from variable to fixed, fixed rates are generally higher, so the monthly repayment may rise.
The Ministry of Land, Infrastructure, Transport and Tourism survey shows that refinancing accounted for 6.4% of new private mortgage amounts originated in fiscal 2024. No public information could be found on whether foreign nationals or people living overseas can refinance, or whether conditions differ; it depends on each bank’s terms.
What Must the Written Explanation Cover Before You Sign?
At the latest at signing, banks in principle must explain the items in the table below in writing. This is an industry agreement (申し合わせ) of the Japanese Bankers Association dated December 21, 2004. It applies to variable-rate and fixed-period loans, and fully fixed loans are outside its scope.
The Financial Services Agency (金融庁) lists “whether the risk of interest rate changes is adequately explained” as a supervisory focus in its guidelines for major banks and cites this agreement as an example. The guidelines also require that when reference repayment amounts after a rate rise are shown, they must be calculated on reasonable assumptions for the economic conditions at the time. This is an industry agreement and a supervisory focus, not a statutory provision that directly grants rights to borrowers.
| Type | The written explanation must include at least |
|---|---|
| Variable rate | The reference rate and how much the applicable rate moves when the reference rate moves; when the reference rate is reviewed and when the new rate applies; the rules for changing the repayment amount, including how often it is reviewed, its relationship to the rate review, the composition of principal and interest in each payment, and the possibility that rising rates push the burden to the final payment; measures to prevent you from assuming the current rate will last to the end; repayment amounts calculated at rates different from the rate at the time of borrowing; fees, such as fees at signing, for early repayment and for changes in conditions |
| Fixed-period | That the rate and repayment amount do not change during the fixed period and that you cannot switch to another rate type midway; the rules for changing the rate and repayment amount after the fixed period ends, for example that the repayment increases if the rate is higher after expiry; the procedure at the end of the fixed period; the fee or settlement amount for early repayment during the fixed period, and the fee for choosing a fixed rate again after expiry (where charged) |
Once you have the explanation, you can check item by item:
- Which reference rate does my applicable rate follow? How much does the applicable rate move when the reference rate moves?
- On what date is the reference rate reviewed? From which payment does the new rate apply?
- Is my repayment method equal principal-and-interest or equal principal? Does the contract include the 5-year rule and 125% rule?
- When unpaid interest arises, how is it settled? Can I pay it separately?
- What is the monthly repayment if the rate is higher than now? Ask for a written calculation.
- What procedures apply at the end of the fixed period? Is there a fee for choosing a fixed rate again?
- What is the fee for early repayment and for changing conditions? Is there a settlement amount for early repayment during the fixed period?
As of September 2026, the Financial Services Agency’s supervisory guidelines for major banks that were reviewed do not require banks to explain in languages other than Japanese. Clarify any term you do not understand before signing.
Which Claims Should Make You Stop and Check?
- “The policy rate is 1.25%, so mortgage rates are about the same”: The policy rate is not a mortgage rate. Your rate follows the reference rate and the margin stated in your contract.
- “With the 125% rule, repayments can rise by at most 25%”: The repayment amount has a cap, but interest does not. The excess becomes unpaid interest and must still be repaid.
- “Variable loans always adjust repayments only every 5 years”: It depends on the product. For example, Sony Bank does not use the 5-year rule, and Rakuten Bank’s equal-principal repayment has no cap.
- “After the fixed period ends, the original rate continues”: After expiry the rate of the day applies, and repayments may rise.
- “Lock in now or it will be too late” or “rates won’t rise again”: Both are predictions. On September 18, 2026, the Bank of Japan stated that it would continue raising the policy rate depending on economic, price and financial conditions; this was the Bank’s statement that day, not a forecast of mortgage rates.
- “Switching to fixed later means no more worry”: Refinancing incurs costs, and after switching to fixed the monthly repayment may also rise.
How Do You Decide Next?
Answer three questions in order:
- Which types can you choose? Flat 35 accepts only Japanese nationals, permanent residents and special permanent residents. For people living in Taiwan or Hong Kong, among the banks reviewed, the one currently publishing application conditions is Tokyo Star Bank’s “Tokyo Shofuku Sei” (東京招福星), a real estate investment loan with a variable rate. Which products you can apply for is covered in the main article on whether foreigners can get a mortgage in Japan.
- How much change in repayments can you absorb? Use the bank’s written calculation to see how much more you would pay each month if rates rise, and what the repayment might be adjusted to after 5 years.
- How long do you plan to repay, and will you repay early? Look at the length of the fixed period together with the fee or settlement amount for early repayment during the fixed period.
How much change in repayments you can absorb depends on income, other borrowing and your repayment plan.
FAQ: Japan Mortgage Rate Types
If I choose a variable rate on a Japan mortgage, will my monthly payment rise immediately when rates go up?
Not necessarily. The rate is generally reviewed every six months, but when an equal principal-and-interest loan has the 5-year rule, the monthly repayment is recalculated only every 5 years. In the meantime the share going to interest grows, and the part of interest exceeding the repayment becomes unpaid interest, which must still be repaid.
After a fixed period ends on a fixed-period loan, can I choose a fixed rate again?
You can move to a variable rate or choose another fixed period at the rates then prevailing, but the later rate and repayment amount cannot be known when you borrow. Whether a fee is charged for choosing a fixed rate again must be explained by the bank before signing and depends on each bank’s contract.
Do I pay a fee for early repayment of a Japan mortgage?
It depends on the product. Flat 35 charges no early-repayment fee. For private banks, the fees, and any settlement amount that may be charged for early repayment during a fixed period, must be explained by the bank before signing, and amounts follow each bank’s product explanation.
About the Information in This Article
- The information was checked on September 30, 2026, based on official materials from the Japan Housing Finance Agency, the Ministry of Land, Infrastructure, Transport and Tourism, the Bank of Japan and the Financial Services Agency, and on explanations the Japanese Bankers Association, the Central Council for Financial Services Information, Sony Bank and Rakuten Bank have published themselves.
- The following conclusions are drawn from official documents; no official source states any of them in a single sentence: that the 5-year rule and 125% rule are not required by law (the Bank of Japan report says they are “often set at signing”, and the Financial Services Agency guidelines and the Bankers Association agreement only require an explanation of the repayment change rules); that there are no different rules for foreign borrowers by rate type (neither the Ministry’s survey nor the Bank of Japan report distinguishes by nationality or place of residence); that supervisory rules do not require explanations in foreign languages (only the guidelines for major banks were checked); that no public information was found on whether foreign nationals or overseas residents can refinance; and that there is no official material on how banks convert between their mortgage reference rates and prime rates.
- General explanations of rate adjustment, early repayment and refinancing come from industry bodies such as the Japanese Bankers Association and are not statutory provisions; the Central Council’s material is the April 2018 edition, and its website now marks it as an archived site. The 3% to 5% refinancing cost is one financial planner’s estimate on the Bankers Association website. The Ministry’s percentage is for fiscal 2024 new originations and the Agency’s percentage is from an online survey, so the two should not be combined.
- Flat 35 rates are those applicable to October 2026 payouts (updated October 3, 2026 from the Japan Housing Finance Agency’s published October rates). Prime rates are as of September 11, 2026. The Bank of Japan’s April 2026 report does not cover the June and September 2026 increases. Current fixed and variable rate levels at private banks are not included, and later Bank of Japan policy decisions are not reflected.
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Sources
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Important Notice
This article is a general summary of information and is not individual financial, legal or tax advice. It does not represent any bank’s lending decision or rate. The information was checked on September 30, 2026. Rates, bank products and related rules may change at any time; rely on each financial institution’s latest announcements and contract, and consult a qualified professional where needed.
