During my research into buying property in Japan, I chanced upon this informative article covering a fee breakdown of most if not all of the potential fees involve. I have taken the liberty of translating the article from Japanese and have included the source at the bottom.
Many people may be vaguely aware of the costs involved in purchasing a home, but may not have a detailed understanding of what exactly it will cost and how much it will cost. As it turns out, the various costs involved in purchasing a home vary greatly depending on the price of the property to be purchased. For example, the necessary costs will vary greatly depending on whether the property you wish to purchase is new or used.
In this article, we will explain the various costs involved in purchasing a home for both “new” and “used” properties. A rough estimate of the various costs will also be introduced using a model case, so those who are thinking about purchasing a house in the future should refer to this article.
- Various expenses are incurred when purchasing a house
- What is the breakdown of the costs involved in purchasing a home?
- Let’s use examples to get a rough idea of the costs.
- Costs vary between new and used properties
Various expenses are incurred when purchasing a house
When purchasing a house, in addition to the main price of the property, you will have to pay “other expenses” such as taxes and fees. Since the amount of fees varies depending on whether the property is new or used, it is important to have a rough understanding of the fees for each property.
| Fee name | ||||
| 1 | Brokerage fee | |||
| 2 | Stamp fee for real estate sales contract and contruction contract | |||
| 3 | Cost of registration of preservation and transfer of ownership (transfer only) | |||
| 4 | Expenses for building title registration | |||
| 5 | Fire and earthquake insurance premiums | |||
| 6 | Real estate acquisition tax | |||
| 7 | Fixed property tax and city planning tax liquidation money | |||
| 8 | Repair reserve fund | |||
| 9 | Waterworks expense | |||
| 10 | Loan fee | |||
| 11 | Loan guarantee fee | |||
| 12 | Mortgage registration fee |
What is the breakdown of the costs involved in purchasing a home?
Have you grasped that there are some costs and some costs that do not depend on the type of home and whether it is new or used? In addition, there are two main types of expenses involved in purchasing a home: “housing-related” and “mortgage-related. Here is a brief explanation of each item.
Housing-Related Costs
First, let’s take a closer look at the various costs associated with purchasing a home.
Brokerage Fee
A brokerage fee is an expense paid to a real estate company when a housing is bought through the brokerage of a real estate company, and the maximum limit is set by the Building Lots and Buildings Transaction Business Law. Specifically, the maximum amount of a mediating fee is as follows.
| Transaction Price | Brokerage fee limit |
| Up to 2 million yen | 5% of transaction price |
| From 2 million to 4 million yen | 4% of transaction price |
| From 4 million | 3% of transaction price |
When the sales price exceeds 4,000,000 yen, the following quick calculation formula can be used to calculate the approximate amount.
Maximum brokerage fee = sales price x 3% + 60,000 yen + consumption tax
Stamp fee for real estate sales contracts and construction contracts
Stamp fees for real estate sales contracts and construction contracts are predetermined amounts. A construction contract is a contract that is drawn up when purchasing land to build a custom-built house or when remodeling work is to be done on an existing property. In both cases, the amount of the stamp fee is determined based on the “amount stated in the contract.
There is a reduction in the stamp fee for these contracts. Until the end of March 2024, for example, the tax amount for “more than 10 million yen and less than 50 million yen” will be “10,000 yen.
Cost of Registration for Preservation and Transfer of Ownership
There are several types of registration. When purchasing or acquiring real estate in general, “ownership preservation registration” and “ownership transfer registration” are the most common types of registration. In the case of used properties, only the registration of transfer of ownership is required. A “registration and license tax” must be paid when making the registration. The specific formula for the registration tax is as follows
Registration and license tax = assessed value of real estate for property tax purposes x tax rate
The tax rate in the above formula will be reduced until March 31, 2023. Incidentally, the tax rate after the reduction is 0.15% (0.4% under the main rules) for registration of preservation of ownership of a building by sale and purchase, 1.5% (2.0% under the main rules) for registration of transfer of ownership of land, and 0.3% (2.0% under the main rules) for registration of transfer of solid ownership of a building.
Additional fees are incurred if the registration of real estate is not done by an individual but by a professional judicial scrivener. Keep in mind that a fee of 50,000 to 100,000 yen will be charged as compensation.
Cost of title registration
Title registration is a registration that is performed to newly register “the existence and standard of real estate” for land or buildings that have not yet been officially registered. When a custom-built house is built or an unregistered property is purchased, title registration of the building is required.
Although the purchaser of the property can perform the application procedures for title registration, if you would like a specialist to perform the procedures on your behalf, you should ask a land and building surveyor to do so. In such a case, the remuneration fee is said to be in the range of 90,000-120,000 yen.
Fire and earthquake insurance premiums
When purchasing a house, it is common to purchase fire insurance. Earthquake insurance is a set contract with fire insurance. Premiums for fire and earthquake insurance vary depending on the structure of the property, the level of risk, and the region.
Although there are variations in coverage and premiums depending on the insurance company used, assuming a 10-year contract, the guarantee fee is said to be around ¥100,000 for a detached house (H structure) and around ¥40,000 for a condominium (M structure). However, it should be noted that the 10-year contract is scheduled to be abolished in October 2022.
The standard price for earthquake insurance is said to be around 6,500-32,600 yen per year per 10 million yen of insured value. If you are considering purchasing earthquake insurance at the same time as fire insurance, please refer to the following table.
Real Estate Acquisition Tax
Real estate acquisition tax, as the name implies, is a tax levied on the acquisition of real estate such as land and buildings, and is paid only once per year when the property is acquired. The formula for calculating real estate income tax is as follows
Real estate acquisition tax = assessed value of real estate for property tax purposes x 4% tax rate
For buildings acquired as “residences” by March 31, 2024, a reduced tax rate of 3% is applied instead of the regular 4% rate. For land acquired by March 31, 2024, the assessed value (assessed value of fixed assets) will be reduced by one-half, and a reduced tax rate of 3% will be applied. In many cases, the real estate acquisition tax will be reduced to zero yen when purchasing a residence.
Property Tax and City Planning Tax Settlement
Generally, when buying and selling an existing house, it is customary for the seller and buyer to share the property tax and city planning tax according to the number of days they have owned the property.
The amount of each seller’s and buyer’s burden is determined by the “starting date,” which is the starting point for the calculation. For example, if the property tax is 100,000 yen and the city planning tax is 50,000 yen, for a total of 150,000 yen, the seller’s share will be 80,000 yen and the buyer’s share will be 70,000 yen if the starting date is January 1.
Repair reserve fund
The repair reserve fund is an expense incurred when purchasing a new condominium. The amount varies depending on the size of the condominium, such as floor level and total floor space, but is generally estimated to be in the range of 200,000 to 500,000 yen.
Water Supply Contribution Fee
Although the terminology for this fee varies from municipality to municipality, such as water supply subscription fee or water supply dues, it is one of the expenses that arise when purchasing a newly built condominium. When installing a new water supply or increasing the diameter of the existing water supply, it is necessary to pay this fee to the water department of the municipality in which you live. The amount of the water service fee varies from municipality to municipality and ranges from 150,000 to 300,000 yen.
So far, we have explained the various expenses that arise when purchasing a house.
Mortgage-related expenses
The following is an explanation of the various costs associated with a mortgage. Please keep in mind that if you take out a pair of loans, you will have two mortgages, which means twice the amount of expenses.
Stamp Fee for Loan Agreement
A loan agreement is a contract between a financial institution and a borrower when borrowing a mortgage loan. The cost of stamps for a loan agreement varies depending on the amount of money stated in the agreement. Unlike the cost of stamps for real estate sales contracts and construction contracts, there is no reduction in the cost of stamps here.
Financing Fee
A loan fee is an administrative fee paid to the financial institution when a mortgage loan is taken out. They are also called “loan administration fees” or “administrative handling fees.
There are two main types of financing fees: fixed-amount and fixed-rate. The fixed-rate type is a predetermined amount that is paid regardless of the loan amount, and is often set at between 30,000 and 60,000 yen. The fixed-rate type tends to be set at 2.2% of the loan amount. While loan fees tend to be higher for fixed-rate types, there are cases where no loan guarantee fee is charged.
Loan Guarantee Fee
Loan guarantee fee is the money you pay when you sign a contract with a mortgage guarantee company. A guarantee company is a company that repays the debt to the financial institution in place of the borrower in the event that the borrower becomes unable to repay the loan.
There are two types of loan guarantee fees: internal and external. The internal fee is added to the mortgage interest rate, and the interest rate is usually 0.2% to 0.5%. The external frame method is a method in which the entire guarantee fee is paid at the beginning of the loan, and the fee is set at approximately 2% of the loan amount. Some financial institutions offer a loan guarantee fee of 0 yen if the loan fee is set at a higher level.
Mortgage Registration Fee
When you purchase real estate using a mortgage loan, the financial institution from which you borrowed will set up a mortgage on the property. The registration tax is charged for the registration of the mortgage. The registration tax is calculated as follows
Registration tax = amount of mortgage loan x 0.4%.
However, until March 31, 2023, a reduction in the registration tax rate from 0.4% to 0.1% will be applied. In addition, a fee of 50,000-100,000 yen will be charged if the registration procedure is requested to a judicial scrivener.
Let’s use examples to get a rough idea of the costs.
Here, we will have examples for each type of property to get a rough idea of the cost of various expenses when purchasing a home. The breakdown of expenses and conditions are as follows. However, please only consider these amounts as a guide.
The assessed value of fixed assets should be the same amount as the property price.
Fire insurance premiums are assumed to be 100,000 yen for a detached house (H structure) and 40,000 yen for an apartment (M structure), and earthquake insurance is assumed to be 30,000 yen for both.
Real estate acquisition tax is 0 yen after applying tax reduction measures.
Loan administration fee is assumed to be 30,000 yen.
The settlement fee for property tax and city planning tax is set at 100,000 yen.
The remuneration for judicial scriveners is set at 50,000 yen.
The repair reserve fund is assumed to be 300,000 yen.
Example 1｜New detached house (custom-built)
Property price: 50 million yen (land portion: 25 million yen, building portion: 25 million yen)
Mortgage loan amount: 40 million yen
Housing-related
Stamp fee for sales contract: 10,000 yen
Stamp fee for construction contract: 10,000 yen
Registration fee for preservation and transfer of ownership: 462,500 yen
Building: 25 million yen x 0.15% [Registration of preservation of ownership] +
Land: 25 million yen x 1.5% [registration of transfer of ownership] + 50,000 yen
50,000 yen [compensation to judicial scrivener].
Building title registration fee: 90,000 yen
Fire and earthquake insurance premiums: 130,000 yen
Water supply fee: 300,000 yen
Mortgage-related
Stamp fee for the lease agreement: 20,000 yen
Loan fee: 30,000 yen
Loan guarantee fee: ¥800,000
40 million yen x 2
Mortgage registration fee: 90,000 yen
40 million yen x 0.1% [registration tax] +
50,000 yen [compensation to judicial scrivener].
Total: 1,942,500 yen
Example 2｜Newly built condominium
Property price: 40 million yen (land portion: 10 million yen, building portion: 30 million yen)
Mortgage loan amount: 30 million yen
Housing-related Total
Stamp fee for sales contract: 10,000 yen
Registration fee for preservation and transfer of ownership: ¥245,000
Building: 30 million yen x 0.15% [Registration of preservation of ownership] +
Land: 10 million yen x 1.5% [registration of transfer of ownership] + 50,000 yen
50,000 yen [compensation to judicial scrivener].
Fire and earthquake insurance premiums: 70,000 yen
Repair reserve fund: 300,000 yen
Mortgage-related
Stamp fee for lease agreement: 20,000 yen
Loan fee: 30,000 yen
Loan guarantee fee: 600,000 yen
30,000,000 yen x 2
Mortgage registration fee: 80,000 yen
30 million yen x 0.1% [registration tax] +
50,000 yen [compensation to judicial scrivener].
Total: 1,355,000 yen
Example 3｜Old detached house
Property price: 30 million yen (land portion: 15 million yen, building portion: 15 million yen)
Mortgage loan amount: 20 million yen
Housing related
Brokerage fee: 1,056,000 yen
(30 million yen x 3% + 60,000 yen) x 1.10
Stamp fee for sales contract: 10,000 yen
Registration fee for transfer of ownership: 320,000 yen
Land: 15 million yen x 1.5% + 1.5 million yen
Building: 15 million yen x 0.3% + 50,000 yen
50,000 yen [compensation to judicial scrivener].
Fire and earthquake insurance premiums: 130,000 yen
Fixed property tax and city planning tax: 100,000 yen
Mortgage-related
Stamp fee for lease agreement: 20,000 yen
Loan fee: 30,000 yen
Loan guarantee fee: 400,000 yen
20,000,000 yen x 2%.
Mortgage registration fee: 70,000 yen
20 million yen x 0.1% [registration tax]+
50,000 yen [compensation to judicial scrivener].
Total: 2,136,000 yen
Example 4｜Pre-owned condominium
Property price: 20 million yen (land portion: 5 million yen, building portion: 15 million yen)
Mortgage loan amount: 10 million yen
Housing related
Brokerage fee: 726,000 yen
(20 million yen x 3% + 60,000 yen) x 1.10
Stamp fee for sales contract: 10,000 yen
Registration fee for transfer of ownership: 170,000 yen
Land: 5 million yen x 1.5% + 1.5 million yen
Building: 15 million yen x 0.3% + 50,000 yen
50,000 yen [compensation to judicial scrivener].
Fire and earthquake insurance premiums: 70,000 yen
Fixed property tax and city planning tax: 100,000 yen
Mortgage-related
Stamp fee for lease agreement: 20,000 yen
Loan fee: 30,000 yen
Loan guarantee fee: 200,000 yen
10,000,000 yen x 2%.
Mortgage registration fee: 60,000 yen
10 million yen x 0.1% [registration tax] +
50,000 yen [compensation to judicial scrivener].
Total: 1,386,000 yen
Costs vary between new and used properties
As described above, the costs for new and used properties are different. Basically, since a brokerage fee is charged when purchasing an existing property, the total expenses tend to be higher than for a newly built property.
Incidentally, a brokerage fee is also charged for a ready-built house unless the property is purchased directly from the seller. Generally speaking, the total cost for a newly built property is 5-7% of the property price, and 7-10% for an existing property.
Article translation source: https://finance.recruit.co.jp/article/b087/
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