A, a person without dwellings who is using a jeonse loan, inherited 10% equity in a dwelling last year after the death of A's mother. When A applied to extend the jeonse loan maturity, the bank said A had become an owner of one dwelling and told A to repay 200 million won of the total loan. A said, "I inherited 10% equity that is not even one whole dwelling and is hard to sell, so it felt too harsh to treat me as a dwelling owner. How many people can come up with 200 million won in a few months?"
As the government moves to improve the system so that people who inherited and then disposed of a small equity in a dwelling can receive first-time-in-life loan benefits, critics say banks' lending standards are excessively strict compared with other laws such as the Income Tax Act.
According to the financial sector on the 30th, banks check ownership and equity history in dwellings during loan screening based on the Ministry of Land, Infrastructure and Transport's dwelling ownership verification system (HOMS) and the Rules on the Supply of Dwellings (Article 53). Under these standards, having as little as 1% equity in a dwelling leads to being treated as a dwelling owner at the time of lending, regardless of the reason such as inheritance.
In contrast, for capital gains tax, in the case of jointly inherited dwellings, only the heir with the largest equity is considered the owner, and minority equity holders are excluded from the dwelling count. For the comprehensive real estate tax, dwellings inherited within five years are excluded, and equity of 40% or less or low-priced equity (600 million won or less in the greater Seoul area; 300 million won or less in other regions) has no time limit. For acquisition tax as well, inherited dwellings are excluded from the dwelling count for five years.
Whether a person has no dwelling or owns a dwelling makes a big difference in loan eligibility and limits. Jeonse loans have shorter maturities than general mortgage loans; there are no particular restrictions for those without dwellings, but owners of one dwelling have their limit capped at 200 million won. If someone using a 400 million won jeonse loan inherits equity in a dwelling, they must repay 200 million won at maturity.
For mortgage loans, those without dwellings can borrow up to a 600 million won limit, with the cap varying by home price and repayment capacity, but if a person comes to hold a small equity through inheritance, they must sell that equity to obtain a loan. Small equity in a dwelling is realistically hard to dispose of unless it is to a family member.
For first-time dwelling buyers, eased lending regulations apply, such as a loan-to-value (LTV) ratio of 80% (maximum loan of 600 million won; 70% in regulated areas) and a debt-to-income (DTI) ratio of 60%.
Authorities are pushing a plan to erase the dwelling ownership record for those who dispose of a small inherited equity in a dwelling, granting them first-time loan benefits.