KakaoBank Extends Waiver of Prepayment Penalty for Mortgage Loans by 6 Months

Cumulative Exemption Benefits of 29 Billion KRW

KakaoBank announced on the 21st that it will extend the exemption period for prepayment penalties on mortgage loans by six months until the end of the year.

According to KakaoBank, it is the only bank that has waived fees for all prepayments since launching its mortgage loan products.

Since launching mortgage loans in February 2022, KakaoBank has provided prepayment penalty exemptions worth approximately 29 billion KRW to about 29,000 customers as of May this year. This means an average fee burden reduction of 1 million KRW per customer.

Prepayment penalties refer to costs imposed when a customer repays a loan before the scheduled repayment date. Currently, the average prepayment penalty fee rate for mortgage loans in the banking sector ranges from 1.2% to 1.4%, applied up to three years from the loan origination date. For example, a customer who borrowed 500 million KRW with a 30-year term and repays after one year would have to pay a prepayment penalty of about 4 million KRW at a 1.2% fee rate.

According to KakaoBank, it is the only bank in the sector that has applied a prepayment penalty exemption policy on mortgage loans for over two years. Additionally, based on recent disclosures over the past five months by the Korea Federation of Banks, KakaoBank’s average interest rate on newly originated amortized mortgage loans has remained in the 3% range for five consecutive months.

KakaoBank plans to decide on extending the prepayment penalty exemption policy for mortgage loans every six months, taking into account upcoming regulatory changes related to prepayment fees, loss costs, and stable fund management.

In addition to mortgage loans, KakaoBank fully exempts prepayment penalties on all loans, including credit loans for medium- and low-credit borrowers and credit loans for individual business owners. Since its launch in July 2017, the total waived fees have amounted to approximately 151 billion KRW as of the end of May.

A KakaoBank representative said, "We are returning the operational cost savings achieved through innovative IT technology to customers as benefits and conveniences," adding, "We will continue to strive to reduce customers’ financial burdens in more areas through various competitive loan interest rates and fee exemption policies."