[Financial Essay] How to Get 70% LTV in Seoul

[Asia Economy Reporter Kim Min-young] For ordinary homebuyers in Seoul and the metropolitan area, the most realistic way to achieve the dream of owning a home is to combine their own funds with loans to make a purchase. Policy mortgage products recognize a loan-to-value ratio (LTV) of up to 70% for housing collateral in regulated areas for ordinary homebuyers. This means loans can cover up to 70% of the house price even in Seoul.

The Bogeumjari Loan sold by the Korea Housing Finance Corporation (KHFC) is a loan with a fixed interest rate for up to 30 years.

Applicants must be either a couple (or single individual if unmarried) who are either non-homeowners or own one home, with a combined annual income of 70 million KRW or less (or individual income if unmarried). Newlyweds within 7 years of marriage registration can apply if their combined annual income is 85 million KRW or less. The base interest rate is currently fixed at 2.45~2.55% per annum for a 30-year term.

However, the loan applies only to homes priced at 600 million KRW or less as of the loan approval date.

Even if the home is located in a regulated area such as a control zone, speculative zone, or speculative overheating district, the LTV for actual buyers is applied up to 70%, with a basic 60% limit. The Bogeumjari Loan’s actual buyer requirement is a combined annual income of 70 million KRW or less for couples and non-homeownership. To qualify for the 70% LTV, the home to be purchased must be priced at 500 million KRW or less.

The Didimdol Loan has stricter income requirements than the Bogeumjari Loan but offers lower interest rates and allows selection between fixed rates and variable rates adjusted every 5 years.

Applicants must have a combined annual income of 60 million KRW and be the head of a household without a home. However, for first-time buyers, newlyweds, or households with two or more children, the income limit is extended to 70 million KRW. Net assets must not exceed 391 million KRW combined for couples. Interest rates range from 1.95% to 2.70%. For newlywed households purchasing their first home, rates are even lower depending on income: 1.90% (annual income 20 million KRW or less) to 2.40% (40 million to 70 million KRW). This loan can only be used to purchase homes priced at 500 million KRW or less.

The LTV can be applied up to 70%, allowing borrowing up to 200 million KRW. Newlywed households can borrow up to 220 million KRW, households with two or more children up to 260 million KRW, and single unmarried heads of household aged 30 or older up to 150 million KRW. Loan terms can be chosen from 10, 15, 20, or 30 years.

There are also products without income restrictions worth noting. The Qualified Loan is also sold by KHFC and is available regardless of income and even to one-homeowners. The loan limit is up to 500 million KRW, and as of the 6th, the lowest interest rate for the basic product with a 30-year term is 2.78% at Jeju Bank, followed by 2.81% at SC First Bank, and 3.01% at Sh Suhyup Bank. However, most major banks such as Shinhan Bank, Hana Bank, and Kookmin Bank do not offer this product. This is because the total loan volume set by KHFC is limited, and the collateral home price must be 900 million KRW or less, making it more popular than other products.