[Q&A] Mortgage Loans Allowed for Apartments Over 1.5 Billion Won... What Are the Exceptions?

Apgujeong Hyundai Apartment. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Kim Min-young] According to the "Real Estate Regulation Normalization Plan" announced by the government on the 27th, the loan-to-value ratio (LTV) for mortgage loans will be eased to 50% for non-homeowners and one-homeowners planning to dispose of their existing homes. Mortgage loans will also be allowed for apartments priced over 1.5 billion KRW in speculative and overheated speculation districts. Previously, LTV regulations varied depending on the house price and type of regulated area, but from next year, a uniform 50% LTV will be applied regardless of house price.

The Korea Housing & Urban Guarantee Corporation (HUG) and the Korea Housing Finance Corporation (HF) will expand their guarantees for interim payment loans, which were previously provided only for homes priced at 900 million KRW or less, to homes priced up to 1.2 billion KRW. The disposal period for one-homeowners who win a subscription on the condition of disposing of their existing home will be extended from 6 months to 2 years. The new real estate regulation easing measures are summarized in a Q&A format.

Q. If mortgage loans are allowed for apartments priced over 1.5 billion KRW, is it possible to use the loaned money to buy another apartment?

A. Mortgage loans were generally prohibited for apartments exceeding 1.5 billion KRW in speculative and overheated speculation districts, but under this new measure, non-homeowners or one-homeowners who agree to dispose of their existing home can purchase such apartments. This means that gap investment (buying with a lease in place) is possible if the one-homeowner complies with the condition of disposing of the existing home. However, multi-homeowners are still prohibited from obtaining loans.

Q. What is the basis for the market value used in mortgage loans?

A. The market value is based on KB real estate prices and Korea Appraisal Board prices. If there is no market value, the appraisal price by a certified appraiser is applied. Even if the contract price is 1.49 billion KRW, if the market value is 1.5 billion KRW, the loan is not allowed. Conversely, if the contract price is over 1.5 billion KRW but the market value is 1.49 billion KRW, the loan can be obtained.

Q. What is the disposal period for winners of housing subscription?

A. For those with remaining disposal periods as of October 27, the new rules will be applied retroactively. For example, if the disposal deadline ended on October 26, the new rules will not apply retroactively. However, if someone moved into a new apartment in September and the disposal deadline is until March next year, the new standard will apply, extending the disposal period to 2 years.

Q. The guarantee for interim payment loans has been expanded from homes priced at 900 million KRW to those priced up to 1.2 billion KRW. Does the 1.2 billion KRW include additional costs such as expansion fees and options, or is it based solely on the sale price?

A. It is based on the sale price excluding option costs such as balcony expansion.

Q. Is the LTV 50% easing for non-homeowners and one-homeowners applied regardless of the housing price criteria?

A. Previously, LTV regulations were applied differently based on the number of homes owned, whether the area was regulated, and the housing price. One-homeowners who agreed to dispose of their existing home and non-homeowners had LTVs of 70% in non-regulated areas and 20-50% in regulated areas, while multi-homeowners were prohibited from loan execution in regulated areas and had 60% LTV in non-regulated areas. Going forward, the housing price condition will be removed, and LTV will be unified at 50%. However, multi-homeowners are an exception.

Q. When will the financial sector measures be implemented?

A. The plan to expand the guarantee for interim payment loans to homes priced up to 1.2 billion KRW will be completed by revising HUG’s internal regulations and updating bank IT systems by November. Considering this, the implementation is planned by the end of November at the latest. Mortgage loans for purchasing ultra-high-priced apartments exceeding 1.5 billion KRW will be implemented early next year after revising banking supervision regulations.

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