[Practical Finance] Fixed-Rate Mortgages Around 1% Annually... Consider Owner-Occupancy Requirements and More

Subscription for housing applications this month in Seoul Gongneung, Seongnam Wirye, Incheon Gajeong, etc.
Sale prices over 20% below market value
Targeting (prospective) newlyweds, single-parent families, etc.
Restrictions on resale and profit sharing apply

In a situation where commercial bank mortgage loan interest rates fluctuate between 4% and 6% annually, the Newlywed Hope Town offers an opportunity to own a home at an ultra-low interest rate in the 1% range. A dedicated mortgage product with a fixed annual interest rate of 1.6% is provided to successful applicants. Borrowers can finance up to 70% of the home price (up to 400 million KRW) for a maximum of 30 years, making funding relatively accessible.

Another advantage is the affordable sale price. As a public sale, the price ceiling system is applied, making the home price more than 20% cheaper than the surrounding market price. For example, if the average market price is 800 million KRW, the Newlywed Hope Town sale price is set at 640 million KRW or less. Newlywed couples considering purchasing an apartment in the Seoul metropolitan area, where recent high-price controversies have arisen, should take note.

LH is conducting sales this month for Seoul Gongneung Newlywed Hope Town (139 units), Gyeonggi Seongnam Wirye A2-7 Block Newlywed Hope Town (440 units), and Incheon Seo-gu Incheongajeong 2 A-2 Block Newlywed Hope Town (534 units).

Newlywed Hope Town is a public housing project exclusively for newlywed couples, first introduced in 2018. It reflects the needs of newlyweds such as childcare and parenting by expanding facilities like daycare centers and indoor playgrounds, and is supplied in urban areas with good transportation and residential conditions.

The eligibility includes newlywed couples married within 7 years or with children aged 6 or younger, prospective newlyweds planning to marry within one year from the move-in announcement date, and single-parent families with children aged 6 or younger (including unborn children). All household members must be without home ownership from the announcement date until move-in. Newlywed couples married within 2 years or with children aged 2 or younger, prospective newlyweds, and single-parent families with children aged 2 or younger are given priority for 30% of the supply.

Qualification requirements include a monthly average household income of 130% or less (140% or less for dual-income households) and total assets of 379 million KRW or less (as of 2023). Applicants must have subscribed to a housing subscription savings account (Comprehensive Housing Subscription Savings) for more than 6 months and have at least 6 recognized payments. Those with income below 70%, a residence period of 2 years or more in the relevant area, and at least 24 recognized payments in the housing subscription savings receive the maximum subscription score (9 points), which is advantageous for winning the lottery.

There are also points to be cautious about. Upon winning the subscription, restrictions on resale of the sale rights and mandatory residence periods apply. For example, the Gongneung Newlywed Hope Town has a 3-year restriction each, Wirye A2-7 Block Newlywed Hope Town has restrictions of 3 and 5 years respectively, and Incheongajeong 2 A-2 Block Newlywed Hope Town has a 3-year resale restriction. The obligation to share capital gains is also a burden. Users of the dedicated mortgage must settle any capital gains obtained from selling the house or repaying the loan principal and interest. If the sale price exceeds total assets of 379 million KRW, subscribing to the dedicated mortgage is mandatory.

Yeogyeonghee, Senior Researcher at Real Estate R114, advised, “Since the exclusive area of Newlywed Hope Town is relatively small, if the number of children increases, residents may need to consider relocating. Therefore, it is necessary to carefully check the mandatory residence requirements and whether profit sharing applies.”