Financial Services Commission Pre-announces Amendments to Sector-specific Enforcement Rules
The '8-year restriction' on officetel mortgage loans, including those for residential and commercial use, will be lifted. Financial authorities plan to expand the loan limits for officetel mortgage loans by improving the Debt Service Ratio (DSR) calculation method, applying the same standards used for housing mortgage loans.
The Financial Services Commission and the Financial Supervisory Service announced on the 6th that they will conduct a preliminary notice on the revision of implementation rules for each financial sector (banks, insurance, savings, credit finance, mutual finance) containing these details until the 17th. This revision is a follow-up measure to the joint domestic demand revitalization plan by related ministries and is scheduled to take effect from the 24th.
The authorities decided to improve the regulations because, although the role of officetels as affordable housing facilities has expanded due to the rapid rise in housing prices, there have been ongoing criticisms that the DSR calculation method for officetel loans is unreasonable compared to housing mortgage loans.
Accordingly, the authorities will improve the DSR debt calculation method for all officetel mortgage loans by considering recent repayment behaviors and applying the housing mortgage loan method. Currently, regardless of the repayment method, the loan maturity is limited to 8 years, but the revision differentiates the DSR calculation method according to repayment types such as ▲full installment repayment ▲partial installment repayment ▲lump-sum repayment.
For full installment repayment loans, the actual principal and interest repayment amount will be reflected. For partial installment repayment loans, the actual principal and interest repayment amount will also be reflected, but the grace period will be limited to one year, the same as housing mortgage loans. For lump-sum repayment loans at maturity, the current standard (loan maturity of 8 years) will be maintained. Partial installment repayments with a grace period exceeding one year will be considered lump-sum repayment at maturity for calculation purposes.
The authorities expect this measure to contribute to housing stability for low-income and young people. For example, if a borrower with an annual income of 50 million KRW takes out a 30-year principal and interest installment repayment officetel mortgage loan, the loan limit will increase by 180 million KRW from the existing 130 million KRW to 310 million KRW. Additionally, by encouraging long-term installment repayment of officetel mortgage loans, the authorities anticipate an improvement in the qualitative structure of household debt.
The Financial Services Commission stated, “We will promptly proceed with the revision of the implementation rules to alleviate loan difficulties and housing burdens for borrowers with officetel-related mortgage loans.”
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