"Can't Enter My Own Home?" Gangnam Area Banks in Chaos Over Jeonse Loan Ban (Comprehensive)

Implementation of Jeonse Loan Restrictions for Homeowners with Houses Valued Over 900 Million KRW on the 20th
LTV Limits Prevent Loan Execution with Tenant Eviction Conditions When Moving into Own Home

[Image source=Yonhap News]

[Asia Economy Reporters Kangwook Cho, Donghyun Choi] "I am currently living in a jeonse rental, but the apartment I own is valued at over 900 million KRW. Recently, jeonse prices have risen significantly. Is it possible to get additional loans for the increased amount?"

"Dear customer, since the increase is classified as a new loan guarantee, loan processing is not possible."

On the first day of the jeonse loan regulations for homeowners with properties valued over 900 million KRW, which was on the 20th, bank loan counters were generally quiet. However, the situation behind the scenes was different. Instead of in-person visits, phone inquiries surged. Especially at branches located in Gangnam and Mokdong, where high-priced apartments are concentrated, staff were overwhelmed by the flood of phone calls, making it impossible to handle other tasks.

That afternoon at Bank A's branch in Daechi-dong, Seoul, the branch was bustling with customers handling various tasks, but the loan counter itself was not crowded. However, the loan officer was constantly busy answering ringing phones without a moment to put down the receiver.

The officer said, "So far, there have been no new consultations," but added, "However, phone inquiries about the possibility of extending the term for existing jeonse loan customers have been nonstop." He continued, "There were also many questions about additional loans, and when we explained that new loans were not possible, some customers asked if there were other ways to cover the shortfall."

An employee at a Seocho-dong branch said, "Since the follow-up measures on jeonse loans were announced last week, there have been continuous inquiries about the possibility of extending terms for existing jeonse loan customers and whether loans can proceed for customers who have already signed jeonse contracts."

At the Mokdong branch, cases of urgent loan applications from high-value homeowners were hard to find. However, there were many phone consultations expressing dissatisfaction about the impossibility of additional loans due to increased jeonse deposits at lease maturity, as well as inquiries about homes exceeding 900 million KRW combined for couples.

Other banks reported similar situations. Although there were many customer visits and phone consultations last week when the jeonse loan regulation implementation plan was announced, most branches were relatively calm on this day except for a few. In the Gangseo and Gangbuk areas, including Mapo, Yongsan, Seongdong, and Gwangjin branches of Bank B, inquiries continued intermittently.

An employee at a Seongdong branch explained, "Jeonse loans are usually consulted 2 to 3 weeks in advance, and since customers were already aware of the policy implementation, those who needed loans had already obtained them. Therefore, there was no new loan demand, and it seems there were no inquiries because the full regulation on jeonse loans was clear." He added, "However, there were inquiries about the possibility of extending loans for existing homeowners with properties over 900 million KRW and questions about the market price evaluation criteria for their owned homes."

Among the inquiries, some expressed concerns that due to LTV restrictions, loans with tenant eviction conditions would not be executed when moving into their own homes, potentially disrupting their financial plans. In the worst case, those who tried to maximize their loan limits under the existing loan regulation system might have to give up moving into their purchased homes and live in monthly rent or sell their homes. Because of this, a national petition requesting that the LTV limit for jeonse return loans for one-homeowners before the December 16 regulations be set at 40% was submitted to the Blue House the previous day.

The petitioner stated, "Due to the loan limit application before the tenant's eviction date, there were problems with financing. Also, for one-homeowners who had long planned to move in, the return of the deposit to tenants is not proceeding smoothly," and argued, "Those who owned homes before the policy should follow the previous policy to avoid unfairness."

C, who agreed with this petition, said, "Even though I am a one-homeowner, if I cannot move into my own home, I will have to reduce the size of my home or switch to semi-monthly rent because I cannot get a loan for the increased deposit of the current jeonse house. It is unfair not to be able to move into my own home, and forcing me to rent it out and pay taxes?is that the government's policy goal?"

Voices of concern about the jeonse loan restrictions also echoed in online communities such as real estate cafes. On the day, nearly 100 posts asking about new jeonse loans or extensions were posted on the 'Real Estate Study' cafe with 920,000 members and the 'Beautiful My Home' cafe with 800,000 members. Many posts expressed frustration at not receiving clear answers from banks or financial institutions.

D said, "I took out a jeonse loan and signed a housing sales contract before the regulation implementation date of the 20th, but I was told that the loan extension is not possible because the registration was done after the 20th," and argued, "Requiring registration completion only for the sales contract is unfair."

Meanwhile, high-interest loan businesses exploiting the anxiety of loan applicants whose loans were blocked are thriving. Most posts related to jeonse loans had comments like "Loans available, please message me," "Special interest rate discount event ongoing, contact me via KakaoTalk," and "We can match up to 80% jeonse loans." Visiting the website linked by a loan company called '00 Financial Group' showed promotions offering to raise the LTV from 60% to 80% even in regulated areas. Comments recommending P2P loans were also frequently seen.

Professor Kyoo-ahn Shim of Konkuk University's Department of Real Estate said, "Research has confirmed that when the government tightens loan regulations, the middle class tends to switch to high-interest loan sharks with higher risks," and added, "The comprehensive loan regulations applied to both speculators and genuine buyers are expected to cause additional side effects."