Non-Residential LTV in Land Transaction Permit Zones Remains at 70%... Apartment LTV Set at 40%

Financial Services Commission Corrects Policy Confusion

For loans secured by non-residential properties such as officetels and commercial spaces in areas newly designated as land transaction permit zones under the October 15 Housing Market Stabilization Measures, the existing loan-to-value (LTV) ratio of 70% will continue to apply.

On October 17, the Financial Services Commission clarified through an explanatory statement that in regions designated as land transaction permit zones targeting only residential properties, the LTV ratio for non-residential property loans such as officetels and commercial spaces will remain at 70%.

Initially, the Financial Services Commission and the Ministry of Land, Infrastructure and Transport had announced that the LTV ratio for non-residential property loans such as officetels and commercial spaces in land transaction permit zones would be reduced from 70% to 40%, but later corrected this statement.

Accordingly, the new designation of land transaction permit zones will apply only to apartments and to multi-unit or row houses that include at least one apartment building.

The Financial Services Commission explained, "In cases where the land transaction permit zone was previously designated to include non-residential properties, the LTV ratio of 40% applies. However, since the current measures target only residential properties, the regulations on non-residential property loans will remain at their current level."

The Financial Services Commission also stated that for first-time homebuyers, the LTV regulations will remain unchanged for both financial institution loans and policy loans, even in regulated areas.

However, for low- and middle-income actual demand buyers (households with a combined annual income of 90 million won or less, purchasing homes priced at 800 million won or less, and with no existing home ownership), the LTV ratio for financial institution loans will be automatically reduced from 70% to 60% in regulated areas.

For policy loans, the Didimdol Loan will maintain the LTV ratio at 70%, the debt-to-income (DTI) ratio at 60%, and the maximum loan limit remains unchanged.

For the Bogeumjari Loan, the LTV ratio (70% for apartments, 65% for non-apartments) and DTI ratio (60%) will remain unchanged for both first-time homebuyers and actual demand buyers (households with a combined annual income of 70 million won or less, purchasing homes priced at 600 million won or less, and with no existing home ownership).

If a person holding a jeonse (long-term rental deposit) loan acquires an apartment valued at more than 300 million won in a speculative or overheated speculative area, they will lose the benefit of the loan as of the date of completion of the ownership transfer registration, and the loan will be recalled. However, if a tenant is residing in the newly acquired apartment and the lease contract still has time remaining, the recall of the jeonse loan will be deferred until the end of the remaining lease period.

For pre-sale or occupancy rights, the loss of benefit and loan recall will occur on the earlier of the date of completion of ownership transfer registration after the apartment's completion or the date the balance loan is executed.