Safe Conversion Loan, Application Expanded from the 6th to Homeowners with One House Valued Up to 400 Million Won

Applications Open from 6th to 17th for Homeowners with Property Prices Under 400 Million KRW
If Application Volume Falls Short of 25 Trillion KRW, Housing Price Criteria Will Be Raised for Second Phase Applications

[Asia Economy Reporter Song Hwajeong] The preferential Safe Conversion Loan, which allows switching from variable or quasi-fixed (hybrid) rate mortgage loans to long-term, fixed-rate, installment repayment products with low interest rates, will expand its application to homeowners with a single house priced up to 400 million KRW starting from the 6th.

On the 3rd, the Financial Services Commission announced that applications for houses priced up to 400 million KRW will be accepted from the 6th to the 17th, and if the application volume falls short of the supply scale of 25 trillion KRW, the housing price requirement will be raised for a second phase of applications.

Previously, applications were accepted from the 15th to the 30th of last month for houses priced up to 300 million KRW. Homeowners with a single house priced up to 300 million KRW can continue to apply this time as well.

This application period will run from the 6th to the 17th (excluding weekends and holidays) using a 5-day rotation system plus alpha. Those with application numbers ending in 4 or 9 can apply on the 6th, 5 or 0 on the 7th, 2 or 7 on the 11th, 3 or 8 on the 12th, and 1 or 6 on the 13th. On the 14th and 17th, the 5-day rotation system will not be applied. Loans handled by KB Kookmin Bank, Shinhan Bank, NongHyup Bank, Woori Bank, Hana Bank, and IBK Industrial Bank can be applied for at the existing loan bank, while loans from other banks and secondary financial institutions will be accepted by the Korea Housing Finance Corporation.

The eligible loans for the Safe Conversion Loan are variable or quasi-fixed rate mortgages handled by primary and secondary financial institutions before the prior notice date of August 16. Mortgages with a maturity of 5 years or more that have fully fixed interest rates until maturity, as well as policy mortgages (Bogeumjari Loan, Eligible Loan, Didimdol Loan), are excluded.

Eligible applicants are single homeowners with a combined spousal income of 70 million KRW or less, and the house must be priced at 400 million KRW or less. When applying, the market price of the house (KB market price, Korea Real Estate Board market price) will be primarily used, and if no market price is available, the official price and realization rate will be utilized.

The loan limit is up to 250 million KRW within the existing loan amount. A loan-to-value ratio (LTV) of 70% and a debt-to-income ratio (DTI) of 60% will be uniformly applied, but the debt service ratio (DSR) will not be applied. The loan terms are available in four options: 10, 15, 20, and 30 years. The interest rate is reduced by 45 basis points (1bp=0.01%) compared to the Bogeumjari Loan rate, applying 3.8% to 4.0%. Low-income youth (income 60 million KRW or less, age 39 or younger) receive a 55bp reduction, applying 3.7% to 3.9%.

Early repayment fees are waived for terminating existing mortgages for Safe Conversion Loan refinancing and for refinancing the Safe Conversion Loan into other loans later.

Before applying for the Safe Conversion Loan, it is necessary to check the type of loan base interest rate (such as COFIX, financial bonds, which are the basis for calculating loan interest rates), the interest rate adjustment cycle, and the trend of the loan base interest rate to consider when the next interest rate adjustment date is and how much the loan base interest rate has risen during the adjustment cycle. A Financial Services Commission official said, "Applicants should compare the expected loan interest rate at the upcoming adjustment date, not the current loan interest rate, with the Safe Conversion Loan interest rate to decide whether to apply," adding, "If interest rates fall later and borrowers switch to mortgages with lower rates than the Safe Conversion Loan, refinancing is possible without early repayment fees."

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