Financial Authorities Review 40-Year Ultra-Long-Term Mortgage Linkage Plan for Equity Accumulation Housing
[Asia Economy Reporter Song Seung-seop] Financial authorities are considering linking equity accumulation housing with ultra-long-term mortgages. This is to reduce the burden of homeownership for young people.
According to financial authorities on the 23rd, measures are being reviewed to link ultra-long-term mortgages to equity accumulation public housing separately from the 40-year mortgage product.
Equity accumulation public housing is a residential type where only 20-25% of the building and land equity is acquired at the initial sale before moving in. Since only a quarter of the house price is paid upfront, the remaining balance can be paid in installments later, reducing the burden of preparing a large sum of money. It was introduced by the government's August 4th policy last year.
The 40-year mortgage product targets young people and newlyweds. Similar to the conditions for using the Bogeumjari Loan, loans of up to 300 million KRW are available if the annual income is below 70 million KRW and the house price is below 600 million KRW.
Financial authorities are considering applying the ultra-long-term mortgage method when paying the remaining balance in installments. Currently, the longest policy mortgage term is 30 years. If the maturity is extended by 10 years, the monthly principal and interest repayment amount to pay off the remaining balance decreases. This structure allows young people who have difficulty preparing a large sum of money to purchase housing cheaply through equity accumulation housing and repay the remaining balance using a 40-year mortgage.
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Relaxation of Loan-to-Value (LTV) and Debt-to-Income (DTI) regulations for housing mortgage loans targeting low-income and actual demanders will be announced later. Currently, LTV and DTI for eligible non-homeowners are relaxed by 10 percentage points. There is discussion about further relaxing by an additional 10 percentage points and easing income and house price requirements.
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