The Korea Housing & Urban Guarantee Corporation announced on the 3rd that starting from June, it will assess the tenant's repayment ability when reviewing guarantees for Jeonse deposit safe loans.
Until now, guarantees were possible up to 80% of the Jeonse deposit, with a limit of 400 million KRW in the metropolitan area and 320 million KRW in other regions. To prevent excessive Jeonse loans, repayment ability including income and debt will newly be included in the guarantee limit calculation criteria.
The Korea Housing Finance Corporation and SGI Seoul Guarantee have so far conducted Jeonse loan guarantee reviews by reflecting the borrower's income and existing loans. This measure will apply to new applicants from June onward. For tenants using existing guarantees, the current guarantee limit will remain when extending loans.
The Ministry of Land, Infrastructure and Transport had planned to promote this measure as one of its major tasks earlier this year. The authorities believe that Jeonse loans have been rapidly increasing recently amid strengthened household loan management. The fact that other companies' Jeonse loan guarantee products already reflect repayment ability also influenced this decision.
A flyer for sale and jeonse listings is posted at a real estate agency in Gangnam, Seoul. Photo by Kang Jin-hyung
The specific formula has not yet been disclosed. Around mid-month, an online service will be introduced on the Korea Housing & Urban Guarantee Corporation's website that allows users to input information such as income and debt to preview the expected guarantee limit. A Ministry of Land official stated, "If the annual income is over 10 million KRW, the guarantee limit will hardly decrease."
Regarding Jeonse loan guarantee products, the Korea Housing & Urban Guarantee Corporation offers a package product combined with the Jeonse deposit return guarantee. It is not possible to purchase only the Jeonse loan guarantee separately. The Korea Housing Finance Corporation is reported to have a product that guarantees only Jeonse loans separately. The Korea Housing & Urban Guarantee Corporation holds about a 20% market share in Jeonse loan guarantees.
Yoo Byung-tae, president of the Korea Housing & Urban Guarantee Corporation, said, "Starting in May, we will apply a 90% guarantee ratio to banks and operate the system so that Jeonse loans are made more reasonably by considering the borrower's repayment ability."
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