What Happens to the Deposit if You Can't Pay the Balance Due to a Loan Block? [Ryu Taemin's Real Estate A to Z]

If the Remaining Payment Is Not Made on Time, the Deposit Generally Cannot Be Refunded
If a Special Clause Is Included in the Contract, the Chances of Refund Increase

[Asia Economy Reporter Tae-min Ryu] #Mr. A, who signed a sales contract last month for his first-ever home purchase, had received a firm confirmation from the bank just before the contract that his current credit rating posed no problem for a mortgage loan. Mr. A transferred a deposit amounting to 10% of the house price to the seller, but shortly afterward, he was contacted by the bank stating, "Mortgage loans have recently been suspended, so it will be difficult to pay the remaining balance."

Recently, as major banks have consecutively suspended mortgage and jeonse loans, cases of contracts being canceled due to failure to pay intermediate or final payments are increasing. Typically, the deposit is funded by the buyer or tenant, and subsequent payments are covered by loans, but sudden loan suspensions leave no way to secure a large sum of money. If a loan agreement was signed before the suspension, the loan will be executed as planned, but if no agreement was made, it is highly likely that the loan will not be granted.

Under civil law, if the buyer fails to pay the intermediate or final payments by the specified date, the seller can cancel the contract. In such cases, the buyer generally cannot recover the deposit already paid. This applies equally to both jeonse and sales contracts.

However, the situation differs if special provisions are included in the contract. Attorney Jeom Seong-sook of Beopdo Comprehensive Law Office explained, “If both parties are aware in advance that the remaining balance will be paid through a loan, and the change is due to unforeseen external factors such as government policy changes, the buyer may have justifiable grounds to cancel the contract.” She added, “If there are text messages or call records notifying the homeowner of this, the likelihood of recovering the deposit increases.”

Apartment pre-sale contracts, considered a type of sales contract, are similar. If the pre-sale contract holder fails to pay the intermediate or final payments on time, the construction company, as the contract party, can cancel the contract. However, if the pre-sale company explicitly states in the contract that loans for intermediate or final payments will be provided, and the loan suspension is due to external factors as in the previous case, joint responsibility between the pre-sale company and the buyer may be recognized. Attorney Jeom said, “If joint responsibility is acknowledged, the contract can be properly canceled, increasing the chances that the buyer will recover the deposit.”