If Young Adults Join the Youth Subscription Savings Account and Win... Minimum 2.2% Annual Interest Mortgage Loan

Ruling Party and Government Announce 1·2·3 Measures for Youth Homeownership
New Youth Housing Dream Account with Up to 4.5% Interest Rate Introduced
Low-Interest Loans Up to 80% of Sale Price for Successful Subscription Applicants

The government will provide mortgage loans at a low interest rate in the 2% range to help young people without homes secure stable housing. The interest rate on the newly introduced subscription savings account will also increase from a maximum of 4.3% to 4.5% per year.

[Image source=Yonhap News]

On the 24th, the Ministry of Land, Infrastructure and Transport announced through a government-party consultation that it will promote the ‘Youth Home Purchase 1·2·3 Housing Support’ program, which offers additional preferential low-interest loans in the 2% range in three life stages for those who subscribe to the subscription savings account for one year.

Won Hee-ryong, Minister of Land, Infrastructure and Transport, stated, “To support the dream of homeownership, which the future generation is most anxious about and suffering from, and to move toward a society with a strong middle class, the government plans to implement a groundbreaking policy that provides financial opportunities for homeownership at a long-term low interest rate in the 2% range when subscribing to a dedicated subscription savings account.” Considering that the current mortgage loan interest rates at commercial banks are in the 5-6% range annually, this is a remarkable benefit.

This measure was prepared following the president’s directive to promote policies for youth housing stability and the establishment of a hopeful housing ladder.

The ‘Youth Housing Dream Subscription Savings Account’ (for non-homeowners aged 19 to 34) supports asset formation and provides subscription opportunities by applying relaxed subscription conditions compared to the current youth preferential subscription savings account (income limit increased from 36 million KRW to 50 million KRW, from household head without a home to non-homeowner), higher interest rates (maximum increased from 4.3% to 4.5%), and higher payment limits (maximum increased from 500,000 KRW to 1,000,000 KRW). The Youth Housing Dream Subscription Savings Account is scheduled to be launched early next year. The government estimates that about 100,000 people annually will be able to benefit from the loan.

Youth who win the subscription lottery with this account will be supported with purchase funds up to 80% of the sale price at a low interest rate through the dedicated loan called ‘Youth Housing Dream Loan.’ If the winner is under 39 years old and meets the income criteria (unmarried up to 70 million KRW, married up to 100 million KRW), they can receive loan support with a minimum annual interest rate of 2.2% (differentiated by income and maturity) for up to 40 years. The target housing is priced at 600 million KRW or less and has an exclusive area of 85㎡ or less.

Even after using the loan, additional interest rate benefits will be provided if the borrower gets married, has a child, or has multiple children (additional births). The interest rate will be reduced by 0.1 percentage points upon marriage, 0.5 percentage points for the first childbirth, and 0.2 percentage points per additional child. However, the loan interest rate floor is 1.5%.

To reduce the burden of monthly rent for young people and others who find it difficult to purchase a home immediately, support for low-interest housing fund monthly rent loans will be strengthened, and the monthly rent tax credit will be expanded. First, the limit for the housing fund residential stability monthly rent loan will be increased from 400,000 KRW to 600,000 KRW per month.

The target housing eligible for youth guaranteed monthly rent loans will be expanded from deposits of 50 million KRW or less to 65 million KRW or less, and the loan limit will also increase from 35 million KRW to 45 million KRW. Currently, the loan must be repaid in a lump sum when the monthly rent contract ends, but after the contract period ends, repayment can be made in installments over up to 8 years.

Minister Won said, “Before young people and low-income households who are still renting challenge homeownership, the government will not neglect efforts to reduce their housing cost burdens, solve various social problems that hurt vulnerable renters such as rental fraud, and strongly protect the housing of ordinary people.”