Starting Next Month, Housing Finance Corporation Also Allows Subscription to Jeonse Deposit Return Guarantee

Reference image (Photo by Mun Ho-nam munonam@)

[Asia Economy Reporter Kim Hyo-jin] Starting next month, the Korea Housing Finance Corporation (KHFC) will also offer Jeonse Deposit Return Guarantees. Additionally, the guarantee fees for Jeonse loans for the homeless and low-income individuals will be reduced.

The Financial Services Commission announced on the 29th that this measure is being implemented to prevent tenants from the risk of not receiving their Jeonse deposits back and to establish a support system focused on low-income and genuine demanders.

Accordingly, borrowers applying for Jeonse loans from the 1st of next month will be able to subscribe to the KHFC Jeonse Deposit Return Guarantee product at major bank branches such as KB Kookmin, Shinhan, Woori, Hana, NH Nonghyup, and IBK Industrial Bank starting from the 6th of the same month.

The Jeonse Deposit Return Guarantee is a product where if the landlord fails to return the Jeonse deposit after the contract ends, the guarantee institution returns it on their behalf, and then recovers the amount from the landlord.

Until now, KHFC provided guarantees for Jeonse loan funds but did not offer Jeonse Deposit Return Guarantees. As a result, borrowers had to use products from other institutions separately, causing inconvenience.

Since the guarantee is provided by the same institution, the Jeonse Deposit Return Guarantee fee is set affordably at 0.05~0.07%. The Financial Services Commission has ensured that the same guarantee fee applies without discrimination to single-family and multi-family houses.

The reduction rate of Jeonse loan guarantee fees for homeless borrowers with an annual income of 25 million KRW or less, currently at 0.1 percentage points, will be expanded to 0.2 percentage points. Conversely, the additional guarantee fee rate for homeowners with an annual income of 70 million KRW or more will increase from the current 0.05 percentage points to 0.2 percentage points.

This is intended to focus KHFC’s public Jeonse guarantees on the homeless and genuine demanders.

Major banks such as KB Kookmin and Woori will launch partial installment repayment Jeonse loan products in the second half of this year. Unlike the existing method where only interest is paid during the two-year Jeonse contract period, the partial installment repayment Jeonse loan allows borrowers to repay part of the principal as well.

The banks plan to design the product structure favorably for borrowers by preparing measures so that borrowers who stop partial repayments due to financial circumstances will not be considered delinquent and by allowing them to receive loans up to the existing loan limit when extending Jeonse loans.

From the borrower’s perspective, repaying even a small portion of the principal over two years can help accumulate a lump sum after the loan period ends, and the Financial Services Commission expects this will also aid financial institutions in managing Jeonse loan risks.

When banks launch and handle partial installment repayment Jeonse loans, KHFC plans to set the loan guarantee fee at the lowest level (0.05%) for homeless borrowers and provide banks with benefits such as an increased guarantee ratio (from 90% to 100%) and contribution fee incentives to encourage more banks to introduce such products.

This content was produced with the assistance of AI translation services.