The Korea Herald

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Housing rule violators to be forced to pay back mortgage loans

FSC in progress to introduce strong-handed loan ban on loan expedients

By Bae Hyunjung

Published : Dec. 29, 2019 - 15:40

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Starting as early as mid-January, home buyers caught breaking the government’s real estate regulations will immediately have to redeem their mortgage loans, financial authorities said Sunday.

The Financial Services Commission is working on an additional set of measures to restrain speculative buying sprees in the housing market, focusing on jeonse loan borrowers, officials said Sunday.

Under the forthcoming rules, jeonse loan borrowers who purchase a residence priced over 900 million won ($776,000) or turn out to own multiple homes will have to pay back their loans right away. They will also face restrictions in securing loan guarantees.

With no retroactive effect, the new rules will only apply to loans approved after implementation, officials added.

These rules are reinforced versions of conventional rules, which banned people who own houses priced 900 million won or more from public guarantees on their jeonse loan.

People on Sunday tour the model house of Gaepo Presidence Xi, the first apartment complex to be put up for sale since the government's housing price curbing measures announced on Dec. 16. (Yonhap) People on Sunday tour the model house of Gaepo Presidence Xi, the first apartment complex to be put up for sale since the government's housing price curbing measures announced on Dec. 16. (Yonhap)


Jeonse, a housing lease system unique to Korea, allows tenants to rent residential spaces on lump-sum deposits, while making it possible for owners to possess a house with only the gap amount between the market sale price and jeonse price. This “gap investment” has largely been boosted by the easy lending during the past years and the jeonse loan system.

“Discussions are currently in progress with the Korea Housing Finance Corp., Korea Housing & Urban Guarantee Corp. and Seoul Guarantee Insurance on the timeline of implementation,” said an official of the financial watchdog.

“Considering the time required to revise the related regulations, we expect (the new loan restrictions) to take effect in mid or late January.”

Slated to make the detailed announcement in early January, authorities are now pondering whether to grant exceptions for unavoidable circumstances.

Examples under consideration are those who take jeonse loans in order to move nearby their elderly parents in need of care. People who need a temporary home for a year or more for medical reasons or those who need to change their children’s school due to school violence may also qualify. In all cases, evidential documents such as doctor’s notes or personnel announcement statements would have to be submitted.

“The detailed range of exceptions are yet to be decided and will be kept to a minimum level,” said the FSC official.

By Bae Hyun-jung (tellme@heraldcorp.com)