As the government's household loan regulations continue, Government Employees Pension loans targeting civil servants are gaining popularity. Government Employees Pension loans are not included in the calculation of the debt service ratio (DSR), so some people seek them for real estate purchases.
According to the financial sector on the 7th, starting at 9 a.m. on the 20th on a first-come, first-served basis, the housing fund Government Employees Pension loan ran out in three minutes, exhausting its 18.9 billion won budget. Competition was so fierce that people said it was reminiscent of trying to get tickets for a famous singer's concert. Some civil servants even figured out in advance where to click on the application screen and practiced.
The housing fund Government Employees Pension loan can be applied for only within three months before or after the balance payment date on the real estate sales contract. If an application fails, the borrowing opportunity disappears, completely changing the funding plan. The conditions are that a civil servant with no home for at least two years, including the spouse, is subscribing to or purchasing a dwelling of 85 square meters (25 pyeong) or less of exclusive area. The loan amount ranges from 30 million won to 60 million won depending on the credit score.
Another type of Government Employees Pension loan, the Hope Leap loan, also ran out on the 23rd last month on the day applications opened, exhausting 82.3 billion won. The general loan of 43.3 billion won also closed on the 27th last month on the same day. Both loans were processed on a first-come, first-served basis.
Government Employees Pension loans are excluded from the DSR calculation, which represents the share of a borrower's annual income devoted to loan principal and interest. Even if someone takes out a Government Employees Pension loan, it does not affect loans from banks or other financial institutions, so it is used for real estate purchases. The lending rate is tied to the average bank household loan rate based on new handling amounts. In the fourth quarter last year, the housing fund Government Employees Pension loan rate was 4.2%.
Demand for Government Employees Pension loans is increasing, but the scale is shrinking. According to the Government Employees Pension Service (GEPS), the loan amount rose from 700 billion won in 2015 to 940 billion won in 2021, but decreased to 650 billion won last year and 510 billion won this year.
Government Employees Pension loans are offered four times a year, funded by the pension reserves that civil servants receive after retirement. They are divided into general loans for civil servants who need extra cash, housing fund loans for real estate purchases and jeonse, and Hope Leap loans for newlyweds, those with two children, single-parent families, or civil servants on childcare or medical leave. General loans range from 5 million won to 20 million won depending on credit score, and Hope Leap loans range from 5 million won to 30 million won.