Comparing a 3.86% 20-year fixed mortgage quote in Tokyo

E

EarlyGlass

Buyer
Established
I want a mortgage comparison that reflects what I will really pay, but the fees and loan-to-value tier are making the headline rates misleading. The purchase is around ¥37,480,000 for a two-bedroom property in Tokyo, and one quote is 3.86% with a stated 20-year fixed period.

Should I compare the offers over the likely time I will hold the loan, over the full 20 years, or both? I am looking at payments, upfront charges, the balance at each comparison date and any cost of repaying early, with APR as a cross-check. I also need to establish whether 20 years is the complete term or only the fixed portion, and whether portability has any practical value if I move or refinance.
 
The advertised-rate comparison is understandable, but I would hesitate to let APR or any other single figure decide this. A low-rate offer can lose its advantage through upfront charges, while a higher-rate option may become expensive only if you keep it longer.

I’d run the same cash-flow calculation to the date you are likely to sell or repay and then repeat it for the full term. Include the initial fees, scheduled instalments, balance remaining and early-repayment charge at each date. Treat refinancing as a separate case with another round of costs rather than assuming it will provide a free exit.
 
Is 20 years the entire loan term, or only the fixed-rate period with a balance remaining afterward? Also, what down payment and arrangement fee apply to the 3.86% offer? Without those figures, the loan-to-value tier could matter more than a small difference between headline rates.
 
I’d run at least two comparison periods: one matching your likely ownership horizon and another covering the full 20 years. For the base case, assume no refinancing. Then add a separate refinance scenario with fresh fees rather than treating refinancing as a free escape if rates become less attractive.
 
Cost is only half the decision. Compare the required monthly payment with a payment level you could still manage if income or household expenses changed. A slightly more expensive fixed option may be worthwhile if it leaves enough monthly room and removes uncertainty.
 
Portability can sound more valuable than it is unless the conditions match your plans. Ask exactly what happens if you sell, buy a different property, need a larger loan, or move before completion of the next purchase. The lender’s written terms matter more than the label, and the outcome may depend on a new assessment.
 
I partly disagree with using the expected ownership period as the main comparison. People often stay longer than planned, and the cheapest five-year scenario can hide a costly later period. I would start with the full contractual cash flows, then treat an earlier sale or refinance as an alternative rather than the default.
 
That’s fair, Pablo, but full-term cost can also overstate the importance of payments someone is unlikely to make. I’d keep both views side by side: full-term cost for downside awareness, and expected-horizon cost for the practical decision. Neither should be presented as the single definitive number.
 
Agreed on showing both. One useful addition is a break-even calculation for the arrangement fee: how long must the lower-rate offer remain in place before its interest savings recover the larger upfront fee? That makes the trade-off much clearer than comparing percentages alone.
 
Also keep cash timing visible. Two offers can have similar total costs while one requires substantially more money upfront. I’d list the deposit, lender fees, monthly payment and any repayment cost in separate rows rather than compressing everything into one figure.
 
If the mortgage continues beyond the 20-year fixed period, rate-reset risk needs its own scenario. Test the remaining balance and payment under more than one later rate. If the loan ends at 20 years, that issue disappears, but the monthly affordability test becomes especially important because the repayment period is relatively concentrated.
 
The offers need to be put on identical terms. The main concern is that one lender’s headline figure may exclude costs or rely on a different loan amount, term or fixed-rate structure.

Ask each lender for a written breakdown showing the amount borrowed after the down payment, full loan term, fixed period, arrangement charges, monthly payment, balances at your chosen dates, early-repayment costs and portability conditions. Enter those figures in separate columns and test a likely sale, the full term and a refinance with fresh fees. That will show whether 3.86% suits your circumstances rather than simply differing from the rate first advertised.
 
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