Types of Home Loans and How to Choose | Comparing Fixed-Rate, Variable-Rate, and Flat35 Mortgages with Sendai Case Studies

Starting Mortgage Selection with Understanding Mortgage Types

When purchasing a home in Sendai, many people struggle with the question: "Which mortgage should I choose?" With so many financial institutions and countless interest rates listed in their brochures, it's difficult to determine which option suits your needs just by looking at the numbers.

The key to mortgage selection is first understanding the "mortgage type." There are three main types: variable-rate mortgages, fixed-period-choice mortgages, and full-period fixed mortgages (such as Flat35). Each has its own characteristics and risks. Your choice of mortgage type can affect your total repayment amount by millions of yen.

Variable-Rate Mortgages: Mechanisms and Risks

Lowest Interest Rate, But Subject to Change

Variable-rate mortgages are reviewed periodically in response to short-term market interest rates (policy rates). As of 2026, many financial institutions offer variable rates in the 0.3-0.6% range, the lowest among the three types.

Repayment Review Rules: Variable rates are typically reviewed every six months. However, most banks apply what are called the "5-year rule" and "125% rule" as buffer measures.

While these rules prevent sharp increases in monthly payments, there's a risk that the portion of the interest rate increase becomes "unpaid interest" and is added to the principal.

Who Should Choose Variable-Rate Mortgages

For example, if you purchase a 35 million yen condo in Sendai with a 5 million yen down payment and borrow 30 million yen over 35 years at a variable rate of 0.5%, your monthly payment would be approximately 78,000 yen.

Fixed-Period-Choice Mortgages: Mechanisms and Use Cases

Interest Rate Fixed for a Set Period

Fixed-period-choice mortgages fix the interest rate for an initial period—2, 3, 5, or 10 years—after which you can choose between a variable rate or a new fixed period. During the fixed period, your payment remains constant, making it easier to use during periods with significant expenses like children's education.

Important Note: After the fixed period ends, the rate is reset based on the interest rate at that time. If interest rates have risen significantly during the fixed period, your subsequent payments could increase substantially. You must plan for what happens after the fixed period ends.

Who Should Choose This Option

Full-Period Fixed Mortgages (Flat35): Key Features

Peace of Mind with Unchanged Interest Rates from Borrowing to Payoff

Flat35 is a full-period fixed-rate mortgage provided through a partnership between the Housing Finance Agency and private financial institutions. As of April 2026, 35-year fixed rates generally hover around 1.8-2.0% (varying by institution and application timing).

Key Features of Flat35:

Using the earlier example (30 million yen loan over 35 years) with a full-period fixed rate of 1.9%, the monthly payment would be approximately 100,000 yen. The monthly difference from the variable rate would be about 22,000 yen. However, if interest rates don't rise, this can be viewed as the "cost" of the 35-year commitment, compensating you for peace of mind.

Who Should Choose Flat35

Comparison of Three Mortgage Types

| Item | Variable | Fixed-Period Choice | Full-Period Fixed (Flat35) |

|------|----------|-------------------|---------------------------|

| Interest Rate Level | Lowest | Middle | Highest |

| Payment Stability | Low | Stable during fixed period | Highest |

| Interest Rate Increase Risk | High | Occurs after fixed period | None |

| Suitable Duration | Short to Medium | Medium | Long |

Practical Advice for Choosing a Mortgage in Sendai

Apply for Pre-Approval with Multiple Financial Institutions

Sendai has many options including 77 Bank, Sendai Bank, Tohoku Bank, Japan Post Bank, major banks, and internet banks. Lending terms and approval criteria vary by institution, so rather than narrowing it down to one or two, we strongly recommend applying for pre-approval with multiple institutions for comparison.

Compare Total Repayment Amount

It's dangerous to judge based only on "monthly payment amount." What's important is comparing the total repayment amount, including interest rates, loan period, fees, and guarantee charges. Use simulations provided by real estate companies or financial institutions to compare the 35-year total for fixed, variable, and Flat35 options.

Check Coordination with Housing Loan Tax Deductions

Since 2024, housing loan tax deductions have varied based on energy efficiency and designated property classifications. For properties certified as long-term quality housing or ZEH standard energy-efficient housing, combining Flat35 interest rate reductions (Flat35S) can lower your total cost in some cases.

If you're considering a home purchase in Sendai, we recommend starting mortgage consultations early alongside your property search. M-Assets also provides information about mortgages along with property showings. Please feel free to contact us.