Loan Refinancing Service with 3 Types Smooth Sailing... Authorities Begin System Improvement

The loan refinancing service for three types of loans (mortgage, jeonse deposit loan, and credit loan) through an online, one-stop refinancing infrastructure is off to a smooth start in its early stages. Authorities have also begun improving the system by expanding the target for mortgage refinancing to include villas and officetels with market prices and extending the refinancing period for jeonse loans.

According to financial authorities on the 9th, as of noon on the 7th, a total of 124,103 borrowers refinanced approximately 2.9 trillion KRW in loans through the credit loan refinancing service. This is about eight months since the credit loan refinancing service was launched on May 31 last year.

The 'Mortgage Refinancing' service through an online, one-stop refinancing infrastructure surpassed 10,000 applicants within 15 days of its launch, with the application amount approaching 1.8 trillion won. The photo shows an ATM of a commercial bank installed in Yongsan-gu, Seoul, on the 25th. Photo by Jinhyung Kang aymsdream@

Borrowers who switched to credit loan products with lower interest rates saw an average interest rate drop of about 1.60 percentage points (p) and saved about 570,000 KRW per person annually in loan interest. Their credit scores also increased by an average of about 36 points (based on KCB).

Applications from borrowers are also pouring in for mortgage refinancing, which started on the 9th of last month. As of noon on the 7th, a total of 23,598 borrowers applied for new loans within 22 business days. The total amount of their new loan applications is about 4.2 trillion KRW. So far, 5,156 borrowers have completed all processes of mortgage refinancing, with a loan transfer amount of about 977.7 billion KRW. Borrowers who switched to lower interest rates received an average interest rate about 1.55 percentage points lower, saving about 2.94 million KRW per person annually in loan interest. Their credit scores also increased by an average of about 25 points.

The jeonse loan refinancing service has also attracted attention from borrowers, with about 3,800 applicants within six days of its launch. Since the jeonse loan refinancing service began on the 31st of last month, a total of 3,869 borrowers applied for new loans over six business days. The total amount of their new loan applications is about 678.8 billion KRW. Among them, 370 borrowers have completed loan screening and signed loan agreements, with an application amount of 66.2 billion KRW.

So far, eight borrowers have completed all refinancing processes, with a loan amount of 1.1 billion KRW. For jeonse loans, since multiple verification procedures are required?such as the market price of the property and the presence of senior claims, household members’ housing ownership status, fulfillment of guarantee subscription requirements by guarantee institutions, and the authenticity of the lease contract?the authorities explained that actual screening completion and loan transfers are expected to occur in earnest after the Lunar New Year holiday.

Although only eight borrowers have completed jeonse refinancing, they also benefited from interest rate reductions and loan interest savings. According to authorities, these borrowers received an average interest rate about 1.35 percentage points lower, saving about 1.92 million KRW per person annually in loan interest. An industry official said, "Currently, banks are competitively offering refinancing-exclusive products with minimum annual interest rates in the low to mid-3% range to attract customers," adding, "For borrowers who inevitably took out loans during the 2022?2023 interest rate hike period, a difference of around 1 percentage point in interest rates makes the simple refinancing service attractive."

Meanwhile, based on the results of operations so far, authorities have begun improving the system. For the mortgage refinancing service, the target will be expanded from loans secured by apartments to loans secured by villas and officetels where real-time market price inquiries are possible. Additionally, loans for which ownership registration under the borrower’s name has been completed and mortgage rights have been established by the existing lending financial institution for the balance payment loan will also be considered for mortgage refinancing service use through consultations with participating institutions.

Regarding the jeonse loan refinancing service, currently, due to institutional differences among guarantee institutions, refinancing is only possible before half of the jeonse lease contract period has elapsed. Authorities plan to review expanding this period. To this end, they will consult with guarantee institutions such as the Korea Housing & Urban Guarantee Corporation (HUG), Korea Housing Finance Corporation (HF), and SGI Seoul Guarantee.

Authorities are also considering expanding the available hours for using the credit loan refinancing service. Currently, since the entire refinancing process can be completed within 15 minutes in a one-stop manner, refinancing is only possible during financial institutions’ business hours from 9 a.m. to 4 p.m. Authorities plan to discuss and review expanding these hours as well.