Cash or Mortgage for Japanese Property: A Guide for Foreign Buyers

This article is part of Zagdim’s Japan property series. It sets out the practical differences between paying in full and taking a mortgage when a foreign buyer purchases a home in Japan, for readers living in Taiwan, Hong Kong or Japan who are planning how to fund a Japanese property purchase.

The difference between paying cash and borrowing comes down to four things: whether you can get a loan at all; whether you can use the housing loan tax credit that comes with a loan; the taxes and fees that arise only with a loan; and how tax treats money given by family. Reporting under the Foreign Exchange and Foreign Trade Act (外国為替及び外国貿易法) and identity checks at purchase do not change with the payment method. This article does not judge which arrangement is better. It explains where the differences lie, and the outcome depends on whether you will live in the property, where you live, and where the money comes from.

Why Can’t You Compare Cash and Mortgage on Interest Alone?

Comparing only interest and the funds in hand misses three things that matter more first for a foreign buyer. First, a foreign national may not be able to get a loan, and the products available may be limited to certain uses. Second, the housing loan tax credit requires you to live in the home; if you do not live there yourself, you do not meet the residence requirement (with an exception where family members move in on your behalf). Third, the loan itself generates registration tax, stamp duty and fees.

The word “cash” also means different things in everyday English and in Japanese law. In everyday use, “buying with cash” usually means no loan, paying the full price by bank transfer. The “cash” in Japan’s Act on Prevention of Transfer of Criminal Proceeds (犯罪による収益の移転防止に関する法律) means physical cash. Japan currently has no separate filing that is triggered only because you do not take a loan.

The Short Answer: Where Do Cash and Mortgage Differ?

• Whether you can borrow: Flat 35 (フラット35), which publishes its borrower conditions, is limited to Japanese nationals, permanent residents (永住者) and special permanent residents (特別永住者). Conditions at private banks are set by each bank.
• What a loan adds in benefit: If you live in the home yourself and meet the conditions, the housing loan tax credit (住宅借入金等特別控除, commonly called 住宅ローン控除) applies. It deducts 0.7% of the year-end loan balance from your Japanese income tax, with a cap on the loan amount.
• What a loan adds in cost: Registration and license tax (登録免許税) on registering the mortgage (抵当権), stamp duty (印紙税) on the loan agreement, and the bank’s fees, guarantee charges, group credit life insurance (団体信用生命保険, abbreviated 団信) and fire insurance conditions.
• What is the same either way: A non-resident under the Foreign Exchange Act must report within 20 days of acquiring the property; each international payment above the equivalent of 30 million yen is reported by Foreign Exchange Act residents; real estate agents must verify the buyer’s identity in every case.
• Family funding: Gift tax is not charged on money from parents or grandparents to help buy a home to live in, and this currently applies only to gifts made up to December 31, 2026.

Step One: Can You Get a Mortgage in Japan?

Comparing cash and a mortgage assumes you can borrow. Flat 35 accepts only Japanese nationals, permanent residents and special permanent residents, and is limited to homes lived in by the borrower or relatives; it cannot be used for investment purposes such as renting to a third party. Conditions at private banks for foreign nationals and people living overseas are set by each bank. Among the banks reviewed, there are currently few publicly available products for people living in Taiwan or Hong Kong. Where each type of resident can borrow is covered in a companion article, “Can Foreigners Get a Mortgage in Japan? Permanent Residents, Work Visas and Non-Resident Buyers Compared.”

What Does a Mortgage Add?

The Housing Loan Tax Credit: How Much Is It Worth?

The housing loan tax credit is calculated on the year-end loan balance, but limited to the borrowing cap in the table below, and is deducted each year from your Japanese income tax, at a rate of 0.7% in all cases. The deductible amount is limited by that year’s income tax. It currently applies to people who move in by December 31, 2030. The loan must be repaid in installments over 10 years or more and borrowed from a bank, the Japan Housing Finance Agency (住宅金融支援機構) or an employer and similar lenders. Loans from relatives or friends never count, and loans from an employer at no interest or at a rate under 0.2% also do not count. If you pay entirely in cash there is no loan balance, so there is no credit.

The general limits for people who move in from 2026 are as follows:

These are the general limits. Individuals in the special category (特例対象個人: under 40 with a spouse, or with a spouse under 40, or with a dependent relative under 19) have higher borrowing caps. Which category a new condominium falls into depends on the certificate provided by the developer. Floor area and income conditions are covered in the main article. For a condominium, floor area is judged by the exclusive-use part shown on the registry certificate, excluding common areas.

**Example: Ms. Wu, a permanent resident working in Osaka**

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Ms. Wu holds permanent resident status and works for a company in Osaka. She plans to buy an existing condominium in 2026 to live in. The condominium is not certified housing, ZEH-level energy-saving housing or housing meeting energy-saving standards. By status she meets the Flat 35 eligibility requirements, and she can also compare private bank products.

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If she takes a loan and moves in within 6 months of acquiring the home, the general limits that apply are a borrowing cap of 20 million yen, a credit period of 10 years and an annual credit cap of 140,000 yen, with the actual deduction limited by that year’s income tax. The loan also brings registration and license tax on the mortgage registration (0.1% of the loan amount when the home-to-live-in conditions are met), stamp duty on the loan agreement, and bank fees. If she pays in full, none of these taxes and fees arise, and neither does the tax credit.

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What she needs to do is get a written statement from the bank listing every cost, look at it alongside the credit’s cap, and then decide how much to borrow, or whether to borrow at all.

What Does the Tax Credit Mean for a Buyer Who Will Not Live There?

If you do not live in the home yourself, you do not meet the residence requirement. The basic residence rules are in the main article. For buyers who will not live there or who already own a home, the following points are more directly relevant:

• What counts as living there: At least half of the home’s floor area must be used exclusively as your residence. If you own two or more homes, the credit applies only to the one recognized as your main residence. If you already have a home and buy another as a vacation home, the credit looks only at the one recognized as your main residence.
• Living overseas: For homes acquired on or after April 1, 2016, a non-resident under the Income Tax Act can also qualify if the other conditions are met. However, if you do not live in the home yourself, you still do not meet the residence requirement.
• Exception where family members move in: If you cannot live with your family because of unavoidable circumstances such as a job transfer, and a relative who shares your livelihood, such as a spouse, moves in within 6 months of acquisition and continues to live there, and you will rejoin them once the circumstances end, the credit can apply. This treatment also applies where you are a non-resident, but only for years in which you have Japan-source income subject to aggregate taxation.
• Flat 35 second homes and homes for relatives: A second home (セカンドハウス) acquired with Flat 35 cannot use the housing loan tax credit. A home acquired for relatives to live in generally cannot either; only when the relative who lives there acts as a joint debtor can that joint debtor use it.

In other words, a buyer who does not live in the home and does not fit the family exception above gets from a loan only the borrowing itself and the costs in the next section, not this tax credit. Whether you live there and whether family lives with you decide whether the credit and the reduced registration tax rate can apply.

Which Costs Arise Only With a Mortgage?

Paying in full means no mortgage is registered and no loan agreement is signed, so the following costs arise only with a loan.

• Registration and license tax on registering the mortgage: 0.4% of the loan amount. For an individual who builds or acquires a home to live in by March 31, 2027, the registration of the mortgage for that loan is reduced to 0.1%; the registration must be made within 1 year of acquisition, the floor area must be at least 50 square meters, and so on, and a certificate from the municipality where the home is located is attached to the application. The 0.1% rate does not apply to homes bought to rent out or as vacation homes. When a judicial scrivener (司法書士, a legal professional who handles registration) does the registration, the fee is extra, and there is no uniform official amount.
• Stamp duty on the loan agreement: A monetary loan agreement (金銭消費貸借契約書) is taxed per document by contract amount, for example 10,000 yen for more than 5 million and up to 10 million yen, 20,000 yen for more than 10 million and up to 50 million yen, 60,000 yen for more than 50 million and up to 100 million yen, and 100,000 yen for more than 100 million and up to 500 million yen, with other brackets as well. The reduction in stamp duty through March 31, 2027 applies to real estate transfer contracts (不動産の譲渡に関する契約書), not to loan agreements.
• Bank fees, guarantee charges and insurance: There is no uniform official amount for private banks, and they depend on the bank and product. Flat 35 and one private bank are used below to show two different designs.

How Flat 35 designs its costs (conditions as of April 1, 2026):

• No guarantor is needed, and there is no guarantee fee and no early-repayment fee.
• Loan handling fees vary by lending institution; the property inspection fee is also borne by the borrower.
• The home and land must be mortgaged with the Japan Housing Finance Agency as first-ranking mortgagee, and the setup costs (registration and license tax, judicial scrivener’s fee and so on) are borne by the borrower.
• Fire insurance must be maintained until the loan is repaid, with the insured amount in principle at least the loan amount (where the loan exceeds the insurer’s valuation, the valuation applies), and premiums are paid by the borrower.
• Group credit life insurance (insurance that repays the mortgage from insurance proceeds if the borrower dies and similar cases) can be declined, and the rate is then reduced by 0.2%; but if an event occurs without it, the debt must still be repaid, and in an inheritance it is repaid by whoever inherits the debt.

A private bank example: Sumitomo Mitsui Banking Corporation, in the product description for its web-application-only housing loan (WEB申込専用住宅ローン, viewed at the end of September 2026), states that the borrower uses the guarantee of a guarantee company (保証会社) designated by the bank, with the guarantee charge included in the loan rate; a bank fee of 2.2% of the loan amount (including consumption tax) is paid at borrowing; and the borrower must join the bank’s designated group credit life insurance, with the premium paid by the bank. MUFG Bank’s product description (as of June 17, 2026) states that no guarantee charge is required and the borrower instead pays an administrative fee. Each bank’s conditions may change at any time, so rely on the bank’s latest announcement.

If you plan to borrow first and later use your own funds for early repayment (繰上返済), the minimum partial early repayment on Flat 35 is 100,000 yen or more if applied for through the online service “Jutaku My Note” (住・MyNote), and 1 million yen or more at the lending institution’s counter. At private banks, early-repayment fees and settlement amounts during a fixed period depend on the product; for variable-rate and fixed-period mortgages, banks must in principle explain these fees in writing no later than at signing, under a banking industry agreement.

What Is the Same Whether You Pay Cash or Borrow?

The following procedures depend on your residence status, the transaction itself or the amount remitted, not on whether you take a loan.

• Foreign Exchange Act acquisition report: A non-resident under the Foreign Exchange Act who acquires Japanese real estate must report through the Bank of Japan to the Minister of Finance within 20 days, regardless of amount or floor area. For acquisitions on or after April 1, 2026, the report can be filed by an agent living in Japan (for example, a real estate agent), whatever the purpose. Foreign nationals are in principle presumed to be non-residents; people working at an office in Japan, or who have been in Japan for 6 months since entry, are presumed to be residents.
• A loan does not add a borrower report: In the official materials reviewed, there is no sign that a Foreign Exchange Act non-resident borrowing a mortgage from a Japanese bank must file a separate Foreign Exchange Act report as borrower.
• Large international payment report: For each payment or receipt between Japan and overseas above the equivalent of 30 million yen, Foreign Exchange Act residents file a report afterward; non-residents are exempt, and payments made through a bank in Japan do not need one. A foreign national living in Japan who wires a down payment or the entire price from overseas in a single remittance above this amount may need to file this report, and a resident who receives a payment from a non-resident above the equivalent of 30 million yen at one time must also file. This is a report on international payments, not a procedure specific to buying with cash.
• Identity check by the agent: Under the Act on Prevention of Transfer of Criminal Proceeds, when buying or selling through a real estate business, the business must carry out verification at the time of transaction (取引時確認), confirming the buyer’s identity, purpose of transaction and occupation, regardless of nationality and whether paying cash or borrowing.
• Identity check by the bank: When you borrow from a bank, the bank must also carry out verification at the time of transaction when signing the loan agreement. The same law requires banks to verify cash receipts and payments above 2 million yen (above 100,000 yen for cash transactions accompanied by remittance), and the “cash” here is physical cash, not “paying without a loan.”
• Paying cash itself: Japan currently has no cap on the amount for buying without a loan, and no separate filing that is triggered only by not taking a loan.

The Foreign Exchange Act and the Income Tax Act use different tests for “non-resident.” Under the Income Tax Act, a resident is someone with a domicile in Japan or who has had a residence there continuously for one year or more. The housing loan tax credit uses the Income Tax Act definition, while the 20-day report and the 30 million yen report use the Foreign Exchange Act definition, so the same person can come out differently under the two laws.

How Is Tax Calculated When Family Provides the Money?

When lineal ascendants (直系尊属) such as parents or grandparents provide funds for you to acquire a home in Japan to live in, Japan’s gift tax exemption special provision can apply if the requirements are met. This provision currently applies only to gifts made by December 31, 2026. As of September 2026, the FY2026 (Reiwa 8) tax reform outline reviewed contains no mention of extending it, and whether it applies to gifts from 2027 on depends on later tax revisions.

The main requirements listed by the National Tax Agency (as of laws in force April 1, 2026) are:

• Donor and period: Lineal ascendants such as parents or grandparents, with gifts made between January 1, 2024 and December 31, 2026. A spouse’s parents are not lineal ascendants (unless adoption has been arranged).
• Exempt amount: For each recipient, up to 10 million yen for energy-saving and similar housing (省エネ等住宅) and up to 5 million yen for other housing.
• Recipient: Aged 18 or over on January 1 of the year of the gift; total income of 20 million yen or less for that year (10 million yen or less where the floor area is 40 square meters or more but under 50 square meters).
• Domicile: Having a domicile in Japan at the time of the gift; but if the recipient is a temporary resident and the donor is a foreign donor or a non-resident donor, the recipient does not qualify even with a domicile. People with no domicile in Japan can also qualify in certain cases, but the National Tax Agency page does not specify which.
• Home: Located in Japan, with registered floor area of at least 40 and no more than 240 square meters, and at least half used as the recipient’s residence.
• Deadline: By March 15 of the following year, the home must be acquired using the full gifted funds and the recipient must have moved in by that date or be certain to move in promptly afterward; if the recipient has still not moved in by December 31 of the following year, the exemption in principle does not apply and an amended return must be filed.
• Filing: Gift tax return filed between February 1 and March 15 of the year after the gift.

The 40 square meter floor area minimum in this provision differs from the 50 square meters that generally applies to the housing loan tax credit, and the two cannot be applied to each other. When using this special provision together with the housing loan tax credit, the exempted gift amount must be deducted from the acquisition cost used in calculating the credit.

If the family’s money is lent to you rather than given, that loan cannot count as a qualifying loan for the housing loan tax credit. Whether the recipient owes Japanese gift tax depends on the domicile and nationality of the recipient and donor, among other things, and taxes in Taiwan or Hong Kong may also be relevant. This article covers only the requirements of Japan’s exemption provision.

Which Claims Should Make You Stop and Check?

• “Paying a large amount in cash means a separate filing in Japan”: There is currently no filing triggered only by not taking a loan. The large “cash” verification under the Act on Prevention of Transfer of Criminal Proceeds refers to physical cash.
• “Paying cash means no Foreign Exchange Act report”: A non-resident under the Foreign Exchange Act who acquires real estate must report within 20 days, whether paying cash or borrowing.
• “Buying with a loan means a tax credit”: It applies only if you live in the home and meet the conditions; a Flat 35 second home cannot use it.
• “Flat 35 can also be used to buy a rental property”: Flat 35 cannot be used for investment purposes such as renting to a third party; the agency periodically checks actual residence, and if renting is found the whole loan must be repaid at once.
• “Money from parents is always tax-free”: The exemption is limited to lineal ascendants, homes to live in, gifts made by December 31, 2026, and has requirements on amount, domicile and move-in deadline.

What Five Things Should You Check Before Choosing Cash or a Mortgage?

1. Whether you can borrow: Which products’ public conditions you meet, given your residence status, where you live and what the home will be used for.
2. Whether you will live there: The housing loan tax credit applies only if you live in the home (or fit the family exception); the registration and license tax reduction also depends on living there. If you do not qualify, a loan brings only the borrowing and its costs.
3. The full cost of the loan: Handling fees, guarantee charges or the guarantee charge included in the rate, group credit life insurance, fire insurance, registration and license tax, stamp duty and the judicial scrivener’s fee; get written amounts from the bank and the scrivener.
4. Where the money comes from: Whether a single remittance from overseas exceeds the equivalent of 30 million yen, whether you are a resident under the Foreign Exchange Act, and whether family funds can be gifted and meet the requirements by December 31, 2026.
5. Who files the report: If you are a non-resident under the Foreign Exchange Act, whether you file the 20-day report after acquisition yourself or appoint an agent living in Japan.

Once you have confirmed these five things, compare the two arrangements. For the full picture of mortgages, covering status, screening and interest rates, go back to the main article, “Can Foreigners Get a Mortgage to Buy a Home in Japan? Residency Status, Income Sources and How Banks Approve Loans.”

FAQ: Paying Cash or Taking a Mortgage on Japanese Property

Can I avoid gift tax if I use my parents’ money to buy a home in Japan?

When parents or grandparents help you acquire a home in Japan to live in, and the gift is received by December 31, 2026 and meets requirements on domicile, income and move-in deadline, up to 10 million or 5 million yen per recipient is exempt from gift tax. Whether it will be extended afterward has not been confirmed.

If I buy a home in Japan to rent out, can I use the housing loan tax credit?

The credit requires you to move in within 6 months of acquisition and keep living there; if you buy to rent out and do not live there, you do not meet the residence requirement. The exception is where you cannot live with family because of unavoidable circumstances such as a job transfer and a relative who shares your livelihood moves in, with other conditions.

If I live overseas and take a mortgage from a Japanese bank, do I need to file a separate Foreign Exchange Act report?

In the official materials reviewed, there is no sign that a Foreign Exchange Act non-resident borrowing a mortgage from a Japanese bank must file a separate Foreign Exchange Act report as borrower. The report on acquiring the property itself is still required: a Foreign Exchange Act non-resident who acquires Japanese real estate must report within 20 days, the same whether paying cash or borrowing.

Glossary

• Flat 35 (フラット35): A long-term fixed-rate mortgage run by the Japan Housing Finance Agency together with private financial institutions; only Japanese nationals, permanent residents and special permanent residents can apply.
• Housing loan tax credit (住宅借入金等特別控除 / 住宅ローン控除): A system that deducts from Japanese income tax an amount based on the year-end mortgage balance.
• Special category individual (特例対象個人): A group with a higher borrowing cap under the housing loan tax credit, for example people under 40 with a spouse.
• Mortgage (抵当権): The right to take a home as security for a loan; it must be registered when you borrow.
• Registration and license tax (登録免許税): Tax paid when a registration is made.
• Stamp duty (印紙税): Tax levied on documents such as contracts.
• Group credit life insurance (団体信用生命保険, abbreviated 団信): Insurance that repays the remaining mortgage from insurance proceeds if the borrower dies and similar cases.
• Guarantee company (保証会社): A company that guarantees the borrower’s debt; how the guarantee charge is collected depends on the bank, for example included in the rate.
• Verification at the time of transaction (取引時確認): Under the Act on Prevention of Transfer of Criminal Proceeds, the procedure by which businesses and banks confirm a customer’s identity, purpose of transaction and so on.
• Non-resident (非居住者): Defined separately under the Foreign Exchange Act and the Income Tax Act, with different tests.
• Lineal ascendant (直系尊属): Direct elders such as parents and grandparents, not including a spouse’s parents.

About the Information in This Article

• The information was checked on September 30, 2026, based on official materials from the National Tax Agency, the Ministry of Finance, the Bank of Japan and the Japan Housing Finance Agency, Japanese law, and explanations that banks and the Japanese Bankers Association have published themselves.
• The following conclusions are drawn from official documents; no official source states any of them in a single sentence: that a buyer who does not live in the home does not meet the residence requirement of the housing loan tax credit, and that paying in full brings no such credit (National Tax Agency No. 1211-1, No. 1211-3, No. 1213 Q&A, No. 1234); that paying in full means no mortgage registration and no loan agreement, and so no registration and license tax on mortgage registration and no stamp duty on a loan agreement; that rental or vacation homes do not qualify for the 0.1% reduced rate; that loan agreements are not covered by the stamp duty reduction; that there is no uniform official amount for private bank fees and guarantee charges (the Flat 35 conditions page and the National Tax Agency tax tables were checked, but not every product at every private bank); that no separate Foreign Exchange Act report by a non-resident borrower was found (Bank of Japan Foreign Exchange Act Q&A on capital transactions and related Ministry of Finance explanations; the bank’s own reporting is outside that Q&A’s scope); and that paying cash has no amount cap or extra filing (Ministry of Finance, Bank of Japan and the relevant provisions of the Act on Prevention of Transfer of Criminal Proceeds).
• The housing loan tax credit limits are taken from the FY2026 (Reiwa 8) tax reform outline (Cabinet decision of December 26, 2025) and checked against National Tax Agency explanations; residence tax is not covered. The deductible amount is limited by that year’s income tax; how much can actually be deducted when you have no Japanese income tax was not directly addressed on the pages reviewed. The bank examples come from product descriptions the banks published themselves, with dates as given in the text.
• Things that may change: the housing loan tax credit currently applies to move-ins through the end of 2030; the mortgage registration tax reduction runs to March 31, 2027; the gift tax exemption provision applies only to gifts through December 31, 2026, and whether it will be extended to 2027 and later has not been confirmed. Whether a recipient owes Japanese gift tax, and taxes in Taiwan or Hong Kong, are not covered.

Have a question about this guide? Leave a comment below, or ask Zagdim directly.

Sources

• 国税庁－タックスアンサー No.1211-1 住宅の新築等をし、令和4年以降に居住の用に供した場合（住宅借入金等特別控除）
• 国税庁－タックスアンサー No.1211-3 中古住宅を取得し、令和4年以降に居住の用に供した場合（住宅借入金等特別控除）
• 国税庁－タックスアンサー 住宅借入金等特別控除 QA
• 国税庁－タックスアンサー No.1234 転勤と住宅借入金等特別控除等
• 財務省－令和８年度税制改正の大綱（令和７年12月26日閣議決定）
• 国税庁－タックスアンサー No.4508 直系尊属から住宅取得等資金の贈与を受けた場合の非課税
• e-Gov法令検索－登録免許税法
• e-Gov法令検索－租税特別措置法
• 国税庁－タックスアンサー No.7191 登録免許税の税額表
• 国税庁－タックスアンサー No.7140 印紙税額の一覧表（その1）
• 住宅金融支援機構－【フラット３５】ご利用条件
• 住宅金融支援機構－セカンドハウスのお申込みについて
• 住宅金融支援機構－親族居住用住宅のお申込みについて
• 住宅金融支援機構－よくある質問 Q&A599（団体信用生命保険）
• 住宅金融支援機構－火災保険・地震保険のご案内
• 三井住友銀行－WEB申込専用住宅ローン 特設ページ
• 三菱ＵＦＪ銀行－住宅ローン 商品説明書
• 全国銀行協会－住宅ローン利用者に対する金利変動リスク等に関する説明について（申し合わせ）
• 財務省－非居住者による本邦の不動産等取得に係る報告 制度の概要
• 財務省－外為法に基づく不動産取得報告 よくあるご質問（FAQ）
• 財務省－よくあるご質問「日本と海外との間の送金を行う際に必要な手続」
• 日本銀行国際局－「支払又は支払の受領に関する報告書」FAQ
• 日本銀行国際局－外為法Ｑ＆Ａ（資本取引編）（令和８年４月改訂）
• e-Gov法令検索－犯罪による収益の移転防止に関する法律
• e-Gov法令検索－犯罪による収益の移転防止に関する法律施行令

Important Notice

This article is a general summary of information and is not individual legal, tax, financial or real estate transaction advice. It does not represent any bank’s lending decision or a recommendation of any funding arrangement. The information was checked on September 30, 2026. Rules, tax treatment and bank products may change at any time; rely on the latest announcements of Japanese authorities and financial institutions, and consult a qualified professional where needed.