How to compare mortgage offers in Korea

How to compare mortgage offers in Korea

Comparing mortgages in Korea means evaluating more than the advertised interest rate. Understanding total borrowing cost, hidden fees, and early repayment conditions is essential. Many banks also offer special rates for certain demographic groups or under specific housing policies.

What to compare when choosing a loan

• Interest rate type: Know whether the loan is fixed, variable, or hybrid. Understand the reference rate used (e.g. COFIX).

• Loan-to-Value (LTV) ratio: Varies by region and property type. Seoul properties may face stricter caps.

• DSR and income rules: Ensure your monthly repayments stay within your allowable DSR (typically under 40%).

• Fees and charges: Ask about loan setup fees, appraisal costs, and early repayment penalties.

• Linked banking products: Some banks offer lower rates if you open a salary account or use bundled insurance.

Use tools from bank websites like KEB Hana, KB Kookmin, Shinhan, or NH Nonghyup. Housing finance portals also publish rate comparisons. Check for special offers during real estate expos or policy initiatives like New Hope Loan or Housing Stabilization Fund.

Tips to improve your terms

Maintain a clean credit history and reduce your DSR by avoiding other loans. Applying jointly with a spouse or using policy-backed loan products can help improve rates and approval chances. Many banks offer better terms if you’re a first-time buyer or under 40 years old.

Understanding mortgage types in Korea

Understanding mortgage types in Korea

In South Korea, housing finance options are split between mortgages (주택담보대출) and the jeonse (전세) system—a lump-sum rental alternative. Mortgages are typically used for buying apartments or villas and are available to citizens, permanent residents, and qualified foreigners through local banks and the Korea Housing Finance Corporation (KHFC).

Types of mortgage loans in Korea

• Fixed-rate mortgage: Interest rate is locked in for the entire term (up to 30 years). Ideal for budgeting stability.

• Variable-rate mortgage: Linked to market rates like COFIX or CD rate. Rates adjust periodically—lower initial payments, higher risk long-term.

• Hybrid mortgage: Fixed for a few years, then switches to variable. Balances predictability and flexibility.

• Housing pension loans: Available to older homeowners, using home equity for retirement income.

• Policy-supported loans: KHFC or government-subsidised options for first-time buyers or newlyweds with lower interest rates and relaxed requirements.

Loan terms typically range from 10 to 35 years. Most banks require a 20–40% down payment depending on the property’s value, LTV (Loan-to-Value) limits, and the Debt Service Ratio (DSR), which measures your ability to repay based on total income.

Who is eligible for a Korean mortgage?

Applicants must be 19 or older with a stable income. Foreigners with long-term visas or F-series residency may qualify. Required documents include Korean ID or ARC, proof of income (salary slips, tax documents), bank statements, and property contracts.