Housing payment: (1) When (2) to Whom & (3) How Much

Learn the step-by-step details of your payment schedule when building a house in Japan, and know when you need to prepare your funds by

Top
Articles - Knowledge & Information
Housing payment: (1) When (2) to Whom & (3) How Much

2022-01-08 Updated

Are you worried about money when you are thinking of building a house in Japan?

When we support foreign clients in their house building process, we have a number of similar questions we get in the early phases of the planning:

"When will we need to make our payments?"

"How much cash do we need to prepare?"

"When do I need to complete the mortgage loan process?"

"Who am I paying my money to?"

So, here you are. This is the comprehensive step-by-step guide of (1) when, (2) to whom and (3) how much you need to pay during the course of your house building process in Japan. Read the full article and make sure you understand the whole picture as well as get prepared in what is waiting for you down the line.

This guide describes a typical case in Japan where you are (i) designing your house with an architect, (ii) starting from land search and (iii) going to need to get a mortgage loan. If these two steps are unnecessary for you, you can of course skip that part of the article. Every single house building case may have different circumstances and you can also contact a professional to have a casual consultation about your own situation.

Key timings of your payment in house building process in Japan ...JUMP TO:

1. Decide the land 2. Sign purchase agreement for the land / Apply for credit examination 3. Complete purchase of the land 4. Hire an architect 5. Complete basic design 6. Complete execution design 7. Sign contract for construction work 8. Complete framework construction 9. Complete the entire construction 10. Start payment of your mortgages

KEY EVENTS & PAYMENT SCHEDULE

Here is the summary of your payment schedule when you are building a house in Japan; when and to whom you need to pay. Learn the details of each step in the following description.

Summary of payment schedule of house building in Japan

EVENT


	Payment for:
	Land	Design	Building


	You start with...
Search for a land Plan your budget / loan amount and prepare for credit pre-examination (事前審査) application
	See also: How to find land for sale in Japan - Find the best property with skilled Japanese architects

Decide the land

	Apply to purchase the land

	Apply for credit pre-examination of mortgage loan
	See also: Full Guide - Getting a home loan in Japan for foreigners

Prepare for purchase agreement Prepare for credit examination (本審査)
	(takes approximately 2 days to 1 week)

Sign purchase agreement for the land Apply for credit examination
	Land	Design	Building

	Pay upfront cash payment (手付金) to the landlord (Terms and amount will depend on each land. You may also need to pay all or a part of brokerage fee to the real estate agent you hired.)
	Note: The market average of upfront cash payment for the land (土地手付金) is said to be at around 5% to 10% of the purchase price, depending on each case

	Examination and documantation preperation, mainly by the bank (takes approximately 2-3 weeks)

Sign loan agreement
	(takes approximately 1-2 weeks to execute the loan)

Borrow first money from the bank
	The bank will lend only the amount for your land purchase. The remaining amount will be lent later when the construction is completed. You will not need to start repayment of the principal right away but will need to start paying your interest expenses.

Complete purchase of the land
	Land	Design	Building

	Pay the rest of the price for the land, using the mortgage loan you just borrowed from the bank (You may may also need to pay the remaining brokerage fee to the real estate agent you hired, or other administrative fees to purchase the land.)
	Note: The market price for real estate brokerage fee is 3% of the purchase price + ¥60,000, which is based on the guidance from Ministry of Land, Infrastructure, Transport and Tourism (国土交通省)

Hire an architect
	Land	Design	Building

	Pay the engagement fee to the architect, ranging from 1/6 to 1/3 of the total design fee depending on the architect (You were most likely already in talks with an architect by this phase and this is the official engagement with a Design and Supervision Service Agreement (設計監理業務委託契約). Design fee to the architect is generally 10-20% of the construction price in Japan.)

	Note: The timing and portion weight of the installment payment of the design fee will depend on the architect. Some architects ask you in 3 install payments, maybe some in 6, at different timings from the engagement until the completion of the construction.

Work on the basic design
	(takes approximately 2-3 months to fix the basic design with periodic meetings with you and the architect)

Complete basic design
	Land	Design	Building

	Pay the installment payment to the architect (The portion of the design fee you pay at this timing will depend on each architect)

Work on the execution design
	(takes approximately 2-3 months to fix the execution design with periodic meetings with you and the architect, as well as structural engineers and other partners being involved as necessary)

Complete execution design
	Land	Design	Building

	Pay the installment payment to the architect (The portion of the design fee you pay at this timing will depend on each architect)

Get quotes from contractors / builders

Sign Contract for Construction Work (工事請負契約) with the builder
	Land	Design	Building

		Pay the installment payment to the architect	Pay the installment payment to the builder
		(The portion of the design fee / construction cost you pay at this timing will depend on each architect / builder)
	Note: The timing and portion weight of the installment payment of the construction cost will depend on the builder. Majority of the builders will ask for 3 install payments; start of the construction (着工), completion of framework (上棟) and completion of construction (竣工).

Start construction
	(It will mostly start with the construction of the foundation and the framework. See also: Step-by-Step guide to the house building process in Japan for more details)

Competion of the framework
	Land	Design	Building

		Pay the installment payment to the architect	Pay the installment payment to the builder
		(It is a custom in Japan to make a payment at this timing, regarding the completion of the framework as one major phase. The portion of the design fee / construction cost you pay at this timing will depend on each architect / builder.)

Work on the rest of construction
	(Including building services, interiors, exteriors, furniture, appliances, gardens and others...)

Borrow second money from the bank
	The bank will lend you the remaining amount of your mortgage loan upon completion of the construction.

	Note: If you also need to temporarily borrow cash for the interim payments, after the upfront payment of the land or to the architect / builder until the second loan timing, you can also consider borrowing a bridge loan to fund your interim payments. The same bank may be able to offer a separate bridge loan or there are some banks who can lend you the bridge loan only.

Competion of the construction
	Land	Design	Building

		Pay the installment payment to the architect	Pay the installment payment to the builder
		(You will need to pay the remaining cost to both architects and builders at this timing)

Take ownership of the property / Move in
	(There will also be other administrative fees, including registration or bank administration)

Start payment of your mortgage loans
	(principal repayment and interest payment)