From Next Week, Real Demand Loan Regulations Eased... 'LTV Preferential Rate Increased from 10% to 20%'

40-Year Mortgage Launched... Principal and Interest Repayment Burden Expected to Decrease
Housing Loan Support Limit Also Expanded to 360 Million Won

[Image source=Yonhap News]

[Asia Economy Reporter Kim Jin-ho] Starting from July 1, the preferential rate for the loan-to-value ratio (LTV) applied to mortgage loans (home mortgage loans) for low-income earners and actual buyers will increase from the current 10% to 20%. Additionally, a 40-year ultra-long-term policy mortgage product will be introduced, and the loan support limit for the Bogeumjari Loan will be raised to 360 million KRW.

According to the financial sector on the 26th, the "Plan to Expand Financial Support for Low-Income Earners and Actual Buyers," which includes these measures, will be fully implemented from next month.

The core of the regulatory relaxation is the expansion of the LTV preferential benefit to a maximum of 20 percentage points when the conditions for low-income earners and actual buyers are met. The LTV preferential benefit, which was not available in speculative overheated districts for the 600 million to 900 million KRW range, will increase from 40% to 50%, and in the adjusted target areas for the 500 million to 800 million KRW range, it will increase from 50% to 60%, each by 10 percentage points. However, the maximum loan limit is 400 million KRW, and the Debt Service Ratio (DSR) regulation applies.

The income criterion, which was previously set at a combined couple income of 80 million KRW or less, will be raised to 90 million KRW or less (for first-time homebuyers, from 90 million KRW or less to under 100 million KRW), and the housing price criteria will be relaxed from 600 million KRW or less to 900 million KRW or less in speculative overheated districts, and from 500 million KRW or less to 800 million KRW or less in adjusted target areas.

For example, a borrower with an annual income of 85 million KRW purchasing a 600 million KRW house will see their mortgage loan limit increase by 120 million KRW and 100 million KRW in speculative and adjusted areas, respectively.

A 40-year maturity policy mortgage will be introduced for youth aged 39 or younger and newlywed couples married within 7 years. The target products are the Bogeumjari Loan and qualified loans. This aims to extend the maturity for young households with limited income to reduce the monthly principal and interest repayment burden. For a 300 million KRW loan, the principal and interest repayment amount for a 30-year term is 1,241,000 KRW, but extending it to 40 years reduces it to 1,057,000 KRW.

The loan limit for the Bogeumjari Loan will be expanded from the existing 300 million KRW to 360 million KRW. The Bogeumjari Loan is a fixed-rate mortgage loan provided to households with house prices of 600 million KRW or less and annual incomes of 70 million KRW or less, used by about 170,000 households annually.

The youth jeonse (key money deposit) loan will be expanded, and the guarantee fee for jeonse loans will also be reduced. The limit will be raised by 30 million KRW from the existing 70 million KRW to 100 million KRW. The financial authorities expect that about 5,000 additional young people will benefit annually due to the increase in the loan limit.

A Financial Services Commission official said, "The system improvements will apply to loan applications from July 1," and added, "Regarding the ultra-long-term mortgage product, we will review various measures in the second half of the year to enable its introduction in the private sector as well."

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