Comparing a 3.38% three-year fixed mortgage quote in Tokyo

E

EarlyGlass

Buyer
Established
I want a fair comparison before accepting the offer, but the headline rates are not giving me one. The Tokyo property is around ¥45,900,000, and my current quote is 3.38% fixed for three years. Fees and the loan-to-value band seem to account for part of the difference from the rate I first saw.

For a three-year comparison period, should I total the interest and compulsory charges while listing principal repayment separately? Or, if I may keep the mortgage longer, is a broader APR-style comparison more useful? Monthly affordability still matters, so I do not want a lower three-year cost that produces uncomfortable payments. I also plan to check the early-repayment and portability conditions before responding to the lender.
 
For a three-year fix, I would compare total cash outflow through the end of year three, but show principal repayment separately because it builds equity rather than disappearing as a cost. Put interest, arrangement fees and any other unavoidable charges in one column. APR is useful only if every lender calculates it on the same assumptions. What is the full loan term and expected down payment?
 
That is the missing piece in my comparison: I have the headline quote, but not yet a clean, like-for-like fee breakdown from each lender. The down payment also affects the loan-to-value tier, so changing it may change more than the borrowed amount. I’ll ask for figures through the end of year three rather than relying on the advertised rate.
 
Three years may be too narrow if you are likely to keep the property longer. A fee-heavy loan can look poor at month 36 yet become better later, while the reverse can happen if you sell or refinance early. I’d run at least three scenarios: repayment during the fixed period, refinancing at the end, and continuing after the rate resets.
 
Also separate “cheapest” from “affordable.” The monthly payment during the fix might be comfortable, but that does not answer what happens after year three. Ask for the payment calculation under the quoted rate and identify exactly how the post-fix rate would be determined. Then test your budget at higher payments without assuming refinancing will be available.
 
I would not assign much value to portability until the lender explains what it means in your circumstances. Does it apply if you sell this property and buy another, and would a new affordability or property assessment still be required? Get the conditions in writing. A feature that is heavily conditional should not offset a definite fee in your comparison.
 
I disagree slightly with dismissing APR. It can still be a useful first filter because it forces some charges into the comparison. The problem is treating it as the final answer when your likely holding period is only three years. Use APR to spot outliers, then use a cash-flow table for your actual timeline.
 
Yes, that is fair. My concern was not APR itself but mismatched inputs. I’d make one row per lender and include: amount borrowed, fixed rate, fixed-period payments, interest paid by month 36, remaining balance, upfront fees, early-repayment cost, and assumed rate after the fix. Any blank cell becomes a question for the lender.
 
The loan-to-value tier deserves its own calculation. Ask what property value the lender used and how much additional down payment would move the loan into the next tier, if any. Then compare the cash saved on rate and fees with the cash you would have to lock into the property. A lower rate is not automatically worth draining your reserve.
 
Good point. I would add the value of keeping cash outside the property as a qualitative factor rather than pretending you know its future return. The spreadsheet can show whether extra down payment reduces the three-year mortgage cost; the borrower still has to decide whether that saving justifies having less liquidity.
 
One caution on the refinance scenario: don’t build the decision around an assumption that refinancing after three years will be easy or cheap. Your circumstances, the property valuation and available offers may differ then. Treat refinancing as one possible exit, not the mechanism required to make today’s quote affordable.
 
For early repayment, ask for more than a yes/no answer. You need to know whether partial and full repayment are treated differently, whether timing matters during the fixed period, and what charges or notice requirements apply. Compare the terms against realistic events—sale, bonus payment, or refinance—rather than an arbitrary prepayment amount.
 
The cleanest request to send back would be for a lender illustration covering the same loan amount and term, with all mandatory fees itemised. Ask them to show the monthly payment for the first three years, balance remaining at the reset date, how the next rate is set, and the cost of repaying or refinancing at several points. That should expose whether 3.38% is genuinely the relevant comparison figure.
 
One more thing: record whether each fee is paid upfront or added to the loan. The headline amount may look unchanged while a financed fee increases the balance and attracts interest. That timing difference belongs in both the three-year cash-flow comparison and the remaining-balance figure.
 
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