Financial Services Commission to Reapply 70% LTV Cap to Mortgage Loan Refinancing

Purpose of Reducing Interest Burden for Genuine Homebuyers Undermined
Refinancing Excluded as It Is Not Used for New Home Purchases

The financial authorities have decided to lift the loan-to-value (LTV) regulation on 'mortgage loan refinancing.' This move is interpreted as a response to worsening public sentiment after stricter lending regulations were imposed under the October 15 real estate policy, which effectively blocked refinancing loans that had been used to reduce interest burdens for ordinary people and genuine homebuyers.

According to the financial authorities on the 24th, the Financial Services Commission has decided to instruct banks to treat 'mortgage loan refinancing,' which had been subject to LTV regulations, as an exception starting from the 27th.

Previously, as part of the October 15 measures, the government lowered the LTV ratio from 70% to 40% for all of Seoul and 12 areas in Gyeonggi Province. The Financial Services Commission also decided to apply the new regulation to refinancing loans, as they are classified as new loans issued by a different financial institution.

As a result, if a borrower had already taken out a mortgage loan up to the 70% LTV limit, refinancing would require them to repay 30% of the principal immediately under the new regulation. News of this led to complaints among genuine homebuyers, as using the refinancing system to lower interest burdens would require them to repay a substantial portion of their existing loans.

The Financial Services Commission has decided to apply the LTV standard from the original loan issuance date to mortgage refinancing loans, considering that such refinancing cannot be used to purchase new homes.