Real Estate Transactions, Lower Loan Interest Rates Using 'Electronic Contracts'

Loan Interest Reduced by 0.1~0.2%p with Electronic Contracts
Number of Brokerage Transaction Electronic Contracts Quadruples

When crossing the Banpo Bridge in Seoul, you can see new apartments, old apartments, and apartments under construction all at once in the Sinbanpo area. The new apartments on the left are Acro Riverview Sinbanpo, the low old apartments on the right are Sinbanpo 2nd Complex, and the apartments under construction in the back are the Maple Xi construction site. Photo by Younghan Heo younghan@

# A couple in their 30s preparing for marriage signed a sales contract through an electronic contract system and purchased a 24-pyeong apartment. They paid the deposit with 100 million KRW saved from their job, and took out a loan of 400 million KRW from Bank A (30 years, equal principal and interest repayment). Thanks to the electronic contract preferential interest rate, they received a 0.2% point discount, saving 17 million KRW in loan interest.

# Park, an office worker, borrowed 200 million KRW from Bank B four years ago for a jeonse deposit loan. Bank B reduced the loan interest by 0.2% due to the electronic contract preferential interest rate. When Park compared with a colleague, it was confirmed that he paid 1.6 million KRW less in loan interest.

On the 27th, the Ministry of Land, Infrastructure and Transport announced that the utilization rate of electronic contracts, which are economical, safe, and help prevent jeonse fraud in real estate transactions, is increasing. Real estate electronic contracts are a system where contracts are created by accessing an electronic contract system using a computer, tablet PC, or smartphone instead of paper contracts. It has been in operation since 2016 and supports both face-to-face and non-face-to-face contracts.

Initially, the electronic contract system was mainly used by public institutions, but recently, its use has expanded to private brokerage transactions such as sales and lease contracts. The number of electronic contract brokerage transactions in the first half of this year increased fourfold compared to the same period last year. The number of electronic contract brokerage transactions rose from 6,973 in the first half of 2023 to 27,325 in the first half of 2024.

The electronic contract system can only be used by licensed real estate agents, and identity verification is conducted through mobile phone authentication of the agent and the transaction parties. It protects against illegal brokerage activities by unqualified or unregistered persons. Double contracts at the same address are not possible, preventing contract forgery, alteration, or false reporting.

Because the identity verification of transaction parties is reliably confirmed through electronic contracts, the trustworthiness of contracts increases and the risk of loan and guarantee accidents decreases. Accordingly, financial institutions provide various benefits such as preferential interest rates (0.1~0.2%) for jeonse deposit loans and mortgage loans, reduced fees for ‘Jeonse Deposit Return Guarantee,’ and discounts on registration agency fees (about 30%, for cooperating legal scriveners).

The Ministry of Land, Infrastructure and Transport is preparing a business agreement to link the electronic contract system with the guarantee system. Once the linked system is completed in 2025, the guarantee fees for tenants who signed electronic contracts and joined the rental guarantee will be reduced.