[1mm Geumyung Talk] "Do They Have to Check Health Exam Results During Mortgage Loan Screening?" Buzzing

50-Year Mortgage Loans Only for Those 'Clearly' Able to Repay
Controversy Over 'Repayment Ability = Age · Life Expectancy' Criteria

"Even if a thirty-year-old beginner in society buys a house with a 50-year term loan, they would only be able to repay it by the time they are around 80 years old. Considering the retirement age is 65, can we really say this person has sufficient repayment ability?"

"If someone in their 60s takes out a 40-year mortgage, they would be over 100 years old at maturity. If repayment ability is judged solely by age, banks shouldn't lend at all."

(From an online financial community on the 14th)

The Financial Services Commission (FSC) announced that 50-year term mortgage products will only be available to those who can 'clearly' prove their ability to repay. However, since the criteria for repayment ability are based on age and retirement timing, and mortgage terms span several decades, fairness controversies are inevitable regardless of the age group applied.

At a household debt status review meeting held on the 13th, the FSC stated that if borrowers cannot prove their repayment ability, the maximum maturity for calculating DSR (Debt Service Ratio) will be limited to 40 years. They explained, "The 50-year mortgages sold between July and August were used as a means to increase loan limits and evade DSR regulations," and that this measure is to prevent such practices.

The reason the FSC singled out 50-year term mortgages as a 'comprehensive problem set' is as follows. This product supplied a total of 8.3 trillion won this year, with group loans?which have minimal borrower-level screening?accounting for 55%. Looking at the age groups, 40-50 year-olds made up 57%, and those over 60 accounted for 13%, which is much higher than the 20-30 year-olds (30%). The fact that existing homeowners (52%) used this product more than non-homeowners (48%) also raised suspicions that it was for capital gains purposes.

However, 50-year mortgages were not completely banned by banks. They are only available to those who can clearly prove their repayment ability. The FSC’s stated principle is, "When handling long-term mortgages, it is necessary to confirm that the borrower has sufficient repayment ability throughout the loan period and to set the maturity considering the borrower's life expectancy and retirement timing."

On the 14th, in a real estate-dense shopping area in Songpa-gu, Seoul, where the decline in real estate prices and the transaction freeze phenomenon continue, apartment listings with market prices are posted. Photo by Kang Jin-hyung aymsdream@

An FSC official added regarding the standard for 'clearly,' "It will be the age group eligible to use 50-year term products operated under policy loans," and "Each bank can consider other repayment ability factors, including retirement pensions." Currently, for special Bogeumjari loans, only those aged 34 or younger can use 50-year term mortgages.

Commercial banks are reportedly unsettled as the 'age-based' criteria for mortgage product sales have effectively become guidelines. A representative from a commercial bank said, "When assessing repayment ability, the borrower's expected lifespan is important. If that's the case, shouldn't banks receive annual health check results to more clearly determine if the borrower can live to the average age?" He added, "Since the mortgage product sales criteria have become age-based, it inevitably leads to claims of unfairness."

The FSC cited the UK's Financial Conduct Authority (FCA) 'responsible lending' as an overseas example when presenting debt repayment ability assessment standards. However, even there, there is no mention of life expectancy directly linked to age. Key points include 'reflecting the possibility of changes in the customer's income and expenses during the loan period,' 'considering the customer's retirement, dismissal, and repayment schedules of other loans,' and 'if the loan maturity exceeds the customer's retirement timing, carefully evaluating future income.'

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