Banks Adjust Long-Term Mortgage DSR Calculation Maturity to 'Up to 40 Years'

Financial Services Commission Announces Measures to Curb Household Debt Increase
Only Preferential Type of Special Bogeumjari Loan Remains

On the 14th, in a real estate-dense shopping district 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@

Banks that have handled a large volume of 50-year term mortgage loans (jumdae) will change the maximum maturity for calculating the total debt service ratio (DSR) for long-term loans to 40 years.

The Financial Services Commission announced the results of a household debt status review meeting on the 13th, which included this content, and began administrative guidance for banks the following day. This measure aims to prevent the rapid increase in household loans caused by the use of 50-year term mortgage loans as a means to circumvent DSR regulations.

In August, household loans in the financial sector showed an upward trend centered on mortgage loans. According to the Financial Services Commission, household loans in the financial sector increased by 6.2 trillion won compared to the previous month in August. This marked the fifth consecutive month of increase following April (1.8 trillion won), May (3.6 trillion won), June (6.4 trillion won), and July (5.6 trillion won) this year.

In accordance with government policy, banks will limit the DSR calculation maturity to a maximum of 40 years for borrowers who find it difficult to prove repayment ability throughout the loan period for housing and officetels. The 50-year maturity will only be applied to borrowers whose repayment ability is clearly recognized during the entire loan period.

However, borrowers who meet any of the following conditions will be subject to the previous regulations: ▲ those who signed a sales contract for residential or non-residential real estate and have already paid the deposit by the 12th ▲ those who completed loan application registration through the financial institution’s system ▲ those who received a loan maturity extension notice from the financial institution.

For savings banks, specialized credit finance companies, and mutual finance institutions, the actual maturity is limited to a maximum of 30 years according to the 'Credit Screening Guidelines and Internal Model Regulations,' and the DSR calculation maturity cannot exceed this limit.

View of apartments in Ichon-dong, eastern Seoul, from the 63 Building observatory. Photo by Hyunmin Kim kimhyun81@

The Financial Supervisory Service will conduct an inspection of household loans in the banking sector. By the 22nd, it will investigate Kookmin Bank, Shinhan Bank, Woori Bank, Hana Bank, Nonghyup Bank, Suhyup Bank, KakaoBank, and K Bank. From the 11th to the 26th of next month, it will check compliance with loan regulations at Industrial Bank of Korea, Daegu Bank, Busan Bank, Kyongnam Bank, Gwangju Bank, Jeonbuk Bank, SC First Bank, and Toss Bank.

Meanwhile, financial authorities have decided to abolish the special Bogeumjari Loan general type. This is also a measure taken to stabilize household loans. Applicants for the general type special Bogeumjari Loan and temporary two-homeowners who already own a house can apply for the special Bogeumjari Loan only until the 26th of this month. The general type targeted borrowers with a combined annual income of over 100 million won or homes priced between 600 million and 900 million won. Temporary two-homeowners refer to borrowers who use funds to purchase a new home on the condition that the existing home is disposed of within three years.

After the 27th, the only special Bogeumjari Loan available will be the preferential type product for those with a combined annual income of 100 million won or less and homes priced at 600 million won or less.

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