Enforcement of Jeonse Loan Regulations in the June 17 Real Estate Measures from the 10th
Jeonse Loan Limit for Single-Homeowners Reduced to 200 Million KRW... Private Guarantees Limited to 300 Million KRW
New Homebuyers Must Repay Jeonse Loans Immediately from the 10th
Chairman Eun Seong-su Announces Additional Measures to Address Real Estate Balance Loans to Prevent Unfairness
[Asia Economy Reporter Kim Hyo-jin] Starting from the 10th, if you purchase an apartment exceeding 300 million KRW in speculative or overheated speculation zones, jeonse loans will be restricted. Additionally, if you buy a new house after receiving a jeonse loan on or after this date, you must immediately repay the loan.
The Financial Services Commission announced on the 8th that this measure will be implemented as part of the government's 'June 17 Real Estate Measures.'
The core of this regulation is to include apartments exceeding 300 million KRW within speculative and overheated speculation zones as targets for jeonse loan guarantee restrictions. Accordingly, if you purchase a regulated apartment after receiving a jeonse loan guarantee on or after the 10th, the jeonse loan will be recalled. The intention is to prevent jeonse loans from being used for 'gap investment' (buying a house with jeonse).
Exceptions to the jeonse loan restriction apply when jeonse housing is obtained outside the special/metropolitan city where the apartment was purchased due to actual demand such as job relocation, children's education, parental care, medical treatment, or school violence victimization. It is also an exception if household members actually reside in both the purchased apartment and the jeonse housing.
If the existing lease contract period remains for the purchased apartment, loan recall will be deferred during that period.
However, if the maturity of the current jeonse loan arrives first, it can only be used until that maturity. This means extending the maturity of the jeonse loan is not possible.
Also, from the 10th, the maximum guarantee limit for jeonse loans by the Korea Housing & Urban Guarantee Corporation (HUG) for homeowners will be lowered from 400 million KRW to 200 million KRW. If the jeonse contract was signed before this date, the previous regulations will apply based on the borrower's proof.
For homeowners with one house who used jeonse loan guarantees before the 10th, the previous regulations will apply when extending the loan, but the reduced limit will apply when taking out a new loan such as for moving.
The Financial Services Commission explained, "The full application of the jeonse loan regulation targets two active actions by the borrower: ▲purchasing a regulated apartment ▲applying for a jeonse loan, both occurring after the 10th."
Therefore, cases where the house price was below 300 million KRW at purchase but later rose above 300 million KRW, inheritance of regulated apartments, or purchase of regulated apartments before the regulation date are not subject to the regulation.
If jeonse loans were used before the regulation date and a regulated apartment was purchased after the regulation date, the loan is not subject to recall.
Also, borrowers who applied for and are using jeonse loans after the regulation date will not have their loans recalled if they purchase pre-sale rights or move-in rights for regulated apartments during the loan period.
This regulation targets apartments with high concerns for gap investment, so it does not apply when purchasing non-apartment housing such as villas or multi-family houses.
Earlier, Financial Services Commission Chairman Eun Sung-soo said in an interview with reporters after a seminar with financial company CEOs, regarding the 'June 17 Real Estate Measures,' "The focus will be on ensuring there is no inconvenience or unfairness to apartment pre-sale buyers." He also said, "We are carefully listening to concerns about whether it is difficult to get loans due to retroactive application of regulations in adjusted areas." This is why there are expectations for additional exceptions in jeonse loans in the future.
Meanwhile, pre-sale buyers of apartments in the regulated areas are complaining about difficulties due to unexpected reductions in loan limits. The loan-to-value ratio (LTV) for housing mortgage loans on houses priced below 900 million KRW is 70% in non-regulated areas, but it is lowered to 50% in adjusted areas and 40% in overheated speculation zones. There have been controversies as some apartments were pre-sold before the announcement of the measures, but the areas were later included in regulated zones or the regulation thresholds were raised, resulting in lower LTVs for balance loans.
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