[Changes in the Second Half of 2022] LTV 80% for First-Time Home Buyers... DSR Reflects Future Income

If Loan Exceeds 100 Million Won, DSR 40% Applies

[Asia Economy Sejong=Reporter Kwon Haeyoung] Starting from the third quarter, the loan-to-value ratio (LTV) for first-time homebuyers will be expanded up to 80%, and the loan limit will increase to 600 million KRW. To prevent excessive restrictions on loans for young people with low current income levels, the reflection range of future income in the debt service ratio (DSR) calculation will also be expanded.

The government published "Changes Starting from the Second Half of 2022" on the 30th, summarizing the system and regulatory changes effective from the second half of this year.

The government will prioritize easing LTV restrictions exclusively for first-time homebuyers. Accordingly, the current LTV cap of 60-70% will be expanded to 80%, regardless of the housing location, housing price, or income.

The Financial Services Commission stated, "We will normalize loan regulations that were introduced during the period of rapid housing price increases to support the formation of a housing ladder for actual demanders."

The reflection range of future income in DSR calculations will also be expanded. Currently, the simple average of income between the loan start and maturity dates is recognized as future income, but going forward, it will be improved to the average income flow by age group from the loan start to maturity dates. Additionally, borrowers will be able to select the most advantageous loan maturity when calculating future income. Currently, borrowers can choose between the maximum maturity of 20 years or the actual maturity, whichever is more favorable.

Furthermore, to manage household debt risks, the "three-stage DSR regulation by borrower" will be implemented starting next month.

Borrowers with total loan amounts exceeding 100 million KRW will not be able to receive new loans if their DSR exceeds 40% (50% for non-bank sectors). For example, a borrower with an annual income of 100 million KRW must not have an annual principal and interest repayment amount exceeding 40 million KRW. However, loans exempt from DSR application, such as jeonse loans, interim payment loans, and small credit loans, are not included.