[Taemin Ryu's Real Estate A to Z] DSR 40% Shackles... Loan Barriers for Ordinary People Have Increased

From This Month, LTV Regulations Eased
But to Borrow 400 Million Won Under DSR Rules, Annual Income Must Exceed 50 Million Won
Existing Credit and Other Loans Further Reduce Maximum Loan Amount
Soaring Seoul Apartment Prices Raise Concerns Even with 400 Million Won Loan

#. Office worker A, who embarked on their first 'home purchase,' heard the news that the Loan-to-Value (LTV) ratio regulations would be eased starting in July and visited a bank for a loan consultation. A, who plans to buy a 700 million won apartment located on the outskirts of Seoul, expected to receive an LTV of 60% as a non-homeowner, allowing a maximum loan of up to 400 million won. However, the maximum loan amount was only 300 million won, disrupting their housing fund plan. This was due to being constrained by the strengthened Debt Service Ratio (DSR) regulation, with an annual income of 40 million won and an existing credit loan balance of 30 million won.

Although the government plans to lower the threshold for homeownership for low-income earners and genuine buyers by easing mortgage loan regulations, the effect is expected to be limited. Even if the LTV preferential benefit criteria are relaxed, the application of a 40% DSR makes it difficult to meet the conditions to receive the full maximum loan amount of 400 million won.

To receive the maximum loan of 400 million won, the housing price to be purchased must first exceed 680 million won. From July, in speculative overheated districts, the LTV for houses priced at 600 million won or less will be 60%, and for houses priced between 600 million and 900 million won, it will be expanded by 10 percentage points to 50%. For example, if buying an 800 million won house, an LTV of 60% applies up to 600 million won, allowing a maximum of 360 million won, and 50% applies to the 200 million won between 600 million and 800 million won, allowing a maximum of 100 million won. However, the maximum loan limit is capped at 400 million won, which is lower than the sum of these amounts.

The problem lies with the 40% DSR standard. For the longest policy mortgage applied to houses priced at 600 million won or more, a 30-year maturity secured loan with a loan amount of 400 million won and an interest rate of 2.9% requires an annual principal and interest repayment of about 20 million won (19.98 million won). Applying a 40% DSR means that the annual income must be at least 50 million won to qualify for a 400 million won loan. DSR is an indicator that calculates the burden of principal and interest repayments on all personal loans relative to annual income during loan screening. For example, if the annual income is 50 million won and the annual loan principal and interest repayment is 30 million won, the DSR is 60%.

If there are existing loans, the maximum possible loan amount decreases further. This is because DSR includes credit and other loans as well. Ultimately, young people and non-homeowners with low income or existing loans are restricted by the 40% DSR regulation and cannot receive LTV preferential benefits. Even if the combined annual income of a couple exceeds 90 million won (100 million won for first-time buyers), the corresponding mortgage loan is not possible.

Even if all conditions are met and the maximum 400 million won loan is obtained, the threshold for homeownership remains high. According to the housing price trend time series statistics announced by KB Kookmin Bank, the average apartment sale price in Seoul last month was 1.14283 billion won, rising by more than 200 million won in one year. The average apartment price in the metropolitan area reached 711.84 million won.

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