Financial Services Commission: "Mortgage Loan Refinancing Also Subject to LTV Regulation" [2025 National Audit]

Seoul Apartment Dense Area. Stock Photo

The financial authorities have decided to include "loan refinancing," which is used to switch existing mortgage loans to other loan products, under the scope of the Loan-to-Value (LTV) ratio regulation as part of the October 15 real estate policy.

According to Assemblyman Choo Kyungho of the National Assembly’s Political Affairs Committee on October 22, the Financial Services Commission responded to the inquiry, "Will mortgage loan refinancing also be subject to LTV regulation?" by stating, "Refinancing is considered a new loan processed by a new financial institution, so the financial institution recalculates the LTV ratio at the time of refinancing according to the supervisory regulations of each sector."

This means that even when borrowers pay off their existing loans and switch to loan products with lower interest rates, they will still be subject to the LTV regulation, effectively blocking so-called "loan switching."

With this new regulation, all areas of Seoul and 12 regions in Gyeonggi Province have newly been designated as regulated areas. As a result, borrowers in these regions who wish to refinance at a lower interest rate will need to partially repay their principal, as the LTV ratio has been reduced from 70% to 40%.

During the June 27 loan regulation, the government also limited the mortgage loan ceiling for living stabilization funds to 100 million won, and included refinancing loans in this restriction, which sparked controversy at the time.