Normalization of Real Estate Regulations, LTV Limit for Non-Homeowners Eased to 50%... Mortgage Loans Over 1.5 Billion Won Allowed (Comprehensive)

Unification of LTV at 50% for Non-Homeowners and Single-Homeowners in Regulated Areas
Mortgage Loans Allowed for Apartments Exceeding 1.5 Billion KRW
Expansion of Safe Conversion Loan Eligibility to 600 Million KRW

[Image source=Yonhap News]

[Asia Economy reporters Song Hwajeong and Song Seungseop] Real estate loan regulations will be gradually normalized. For non-homeowners and one-homeowners, loans will be allowed regardless of housing prices, and the loan-to-value ratio (LTV) for regulated area housing mortgage loans will be unified at 50%. Additionally, housing mortgage loans for apartments exceeding 1.5 billion KRW will also be permitted. To alleviate household interest burdens, the eligibility criteria for the Safe Conversion Loan will be expanded to housing prices up to 600 million KRW.

At the 11th Emergency Economic and Livelihood Meeting chaired by the President on the 27th, government support measures for economic revitalization were discussed.

The Financial Services Commission presented multifaceted financial support plans at the meeting, including ▲ easing real estate financial regulations to support the construction industry's fundamentals ▲ stabilizing small and medium-sized enterprises' management through liquidity supply ▲ and reducing household interest burdens.

Kim Joo-hyun, Chairman of the Financial Services Commission, said, "There have been many concerns about the soft landing of the real estate market recently, and it is an important issue for financial market stability. Regulations have actually been strict so far," adding, "With recent interest rate hikes and changes in policy conditions, we will boldly ease them."

First, real estate loan regulations will be gradually normalized. For non-homeowners and one-homeowners (conditional on disposing of existing homes) in regulated areas, loans will be allowed regardless of housing prices, and the LTV regulation will be unified at 50%. Currently, non-homeowners and one-homeowners are subject to 70% in non-regulated areas and 20-50% in regulated areas.

Also, while housing mortgage loans are currently prohibited for apartments exceeding 1.5 billion KRW in speculative and speculative overheated zones, they will now be allowed for non-homeowners and one-homeowners.

Along with this, regulations on loans using existing homes, such as living stabilization funds and housing mortgage loans for returning rental deposits, will also be improved.

The Financial Services Commission plans to promptly prepare detailed measures through consultations with related agencies and implement them early next year after revising the 'Banking Supervision Regulations.'

The eligibility criteria for the Safe Conversion Loan, which allows switching from variable or quasi-fixed (hybrid) rate housing mortgage loans to low-interest, long-term, fixed-rate, installment repayment products, will be relaxed. The housing price requirement will be expanded from the existing 400 million KRW to 600 million KRW or less, and the income requirement will be eased from a combined couple income of 70 million KRW to 100 million KRW or less. The loan limit will also be expanded from a maximum of 2.5 trillion KRW to 3.6 trillion KRW. The Financial Services Commission plans to relax application qualifications from the 7th of next month to accept the second phase of applications, and first-phase applicants can also apply for re-examination to benefit from the expanded loan limit.

The scope of housing mortgage loan debt restructuring will also be expanded. Currently, in cases of unemployment, business closure, or illness, banks support borrowers with housing mortgage loans below a certain scale (one-homeowners with housing prices of 600 million KRW or less) through installment repayment and principal repayment deferral (up to 3 years). Going forward, borrowers who find it difficult to make normal principal and interest repayments due to a sharp decline in sales or increased repayment burdens caused by interest rate hikes, in addition to unemployment, business closure, or illness, will also be eligible for debt restructuring.

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