"Missing the Contract by a Day Means Losing the Preliminary Deposit"... Loan Cliff Hits Due to One-Day Difference [Real Estate AtoZ]

Surprise Announcement of 'Household Debt Management Measures'
Loan Amounts Reduced for 74% of Seoul Apartments

As the government implemented a stringent regulation on June 28, limiting the maximum amount of mortgage loans to 600 million won, buyers who missed the official contract by just one day now face the risk of either forfeiting their contracts or losing their down payments.

On June 30, Yoon Jihae, head of the PropTech Research Lab at Real Estate R114, stated, "If you completed the official contract by the 27th, you can still receive the balance loan under the previous conditions, and there will be no interruption in the loan process." He added, "If the official contract has been signed, there is no reason for the contract to be canceled. However, if it was only a preliminary contract, the new loan regulations will apply as they are." He emphasized, "This is different from cases during housing price surges, when sellers would unilaterally cancel contracts."

This regulation was officially announced by the government before noon on the 27th. Yoon explained, "If a person had the financial means, they likely rushed to finalize their contract later that afternoon, immediately after the government's announcement." Since there was a window of time between the announcement and the enforcement, whether someone had the financial capability and the willingness to close the deal became the decisive factors.

On the ground, there have been a growing number of cases where buyers who made their purchase decisions at the preliminary contract stage are now facing major disruptions in their financing plans. If the regulation takes effect before the official contract is signed, and the buyer is blocked by the new loan limit, they may have to withdraw from the deal. In such cases, buyers may lose part of their down payment. Especially for those who prepaid a portion of the deposit, missing the deadline by just one day could mean losing anywhere from several million to tens of millions of won.

The government stated that this measure is not a newly introduced standard, but rather in line with the existing household debt management policies and loan-related policy principles. An official from the Ministry of Land, Infrastructure and Transport said, "A preliminary contract, by definition, is not an official contract and is not legally recognized as such." The official added, "If we make exceptions for preliminary contracts, it could lead to verbal agreements or false claims, causing significant confusion in the system."

On the 15th, a citizen passing by loan promotional materials in front of a bank in downtown Seoul. Photo by Yonhap News

The reduction in available loan amounts due to this regulation is substantial. According to an analysis based on Real Estate R114's apartment price data for the Seoul metropolitan area, 18 out of 25 districts in Seoul will see a decrease in the maximum loan amount. Previously, in regulated areas such as the three Gangnam districts and Yongsan District, the loan-to-value (LTV) ratio was 50%, while it was 70% in other areas, allowing borrowers to secure loans exceeding 600 million won depending on their income. However, under the new measure, the mortgage loan cap is uniformly set at 600 million won, regardless of the area.

The number of affected households is significant, reaching 1,276,257 out of the total 1,717,384 apartment units in Seoul (excluding rental apartments), which accounts for 74% of the stock. In particular, in the Gangnam area, where the average sale price is around 2.5 billion won, end-users who used to cover the balance with loans are hit the hardest.