Single-Home Owners with Jeonse Loans in the 200 Million Won Range to See Loan Limits Cut by 65 Million Won

Additional Loan Regulations for Real Estate Announced by Government
LTV in Regulated Areas Lowered to 40%
Jeonse Loan Limit for Single-Home Owners Set at 200 Million Won

The Financial Services Commission held an emergency household debt inspection meeting on the afternoon of the 7th at the Government Seoul Office in Jongno-gu, Seoul, to implement follow-up measures for the housing supply expansion plan announced jointly by related ministries. Shin Jinchang, Director of Financial Policy Bureau at the Financial Services Commission (center), is presiding over the meeting attended by related agencies such as the Ministry of Economy and Finance, Ministry of Land, Infrastructure and Transport, Bank of Korea, Financial Supervisory Service, as well as the Korea Federation of Banks, associations of the secondary financial sector, the five major commercial banks, Korea Housing Finance Corporation (HF), and Seoul Guarantee Insurance (SGI). Photo by Financial Services Commission

The maximum loan-to-value (LTV) ratio for homebuyers without a property in regulated areas will be tightened from 50% to 40%. For those owning a single home, the limit on jeonse loans will be uniformly reduced to 200 million won.

Mortgage loans for home purchase or rental business operators in the Seoul metropolitan area and regulated zones, which have been criticized as a workaround to the June 27 loan regulations, will be completely banned.

On the 7th, the government announced these measures to expand housing supply and strengthen loan regulations at a meeting of ministers related to real estate. According to the government, the LTV ratio for those without a home or with a single home under a disposal condition in regulated areas (such as Gangnam’s three districts and Yongsan District) will be lowered from the current maximum of 50% to 40%. Non-regulated areas will maintain the existing 70% LTV.

For single-home owners, the jeonse loan limit in the Seoul metropolitan area and regulated regions will be standardized at 200 million won, regardless of the property’s location. Previously, in the metropolitan area, single-home owners could receive up to 300 million won from Seoul Guarantee Insurance (SGI), 220 million won from Korea Housing Finance Corporation (HF), and 200 million won from Korea Housing and Urban Guarantee Corporation (HUG), but these limits have now been unified.

The Financial Services Commission estimates that, for single-home owners using jeonse loans in the 200 million won range within the metropolitan area, the average loan limit will decrease by about 65 million won. However, if the maturity of a jeonse loan received for a lease contract signed before the implementation of these regulations is extended, the existing loan limits will still apply.

Shin Jinchang, Director of the Financial Policy Bureau at the Financial Services Commission, stated, "According to current statistics, about 30% of those who own a single home and have taken out jeonse loans guaranteed by the three guarantee institutions in the metropolitan area have loans ranging between 200 million and 300 million won." He added, "Assuming these individuals enter into a new jeonse contract in the future, their average loan limit will be reduced by about 65 million won compared to their current limit."

Director Shin explained, "The main purpose of this measure is to standardize the jeonse loan limit at 200 million won, which currently varies by guarantee institution." He acknowledged, "There may be some inconvenience for those whose loan limits are reduced, but these individuals already own a home, and the DSR limit does not apply to jeonse loans, which was taken into consideration."

When asked about the effectiveness of tightening the LTV ratio in regulated areas, given that there is already a 600 million won mortgage loan cap, Director Shin responded, "Not all home prices in regulated areas exceed 1.5 billion won, so this measure targets those properties." He further explained, "If additional areas are designated as regulated zones in the future, the strengthened LTV will also apply to them."

He also hinted at the possibility of designating additional regulated areas, saying, "Such content is not included in the current measures," but added, "However, it may be added in the future." Regarding the plan to introduce DSR limits for jeonse loans, he said, "The timing and method of implementation will be determined by considering the growth rate of household debt and the real estate market situation."