Due to the fact that many tenants engage in “jeonsei” contracts, where the total or majority of the cost to rent must be paid upfront, mortgage loans are quite common in Korea.
Coming up with a lump sum is difficult for many, so the mortgage provider pays your landlord for the property and you make monthly payments to the provider. Banks, building societies, and other lending institutions can set up and provide you with a mortgage or home loans.
As it may be difficult to make large payments to an owner, mortgage providers are there to help protect you from losing your home.
First, a loan officer appraises your property by examining it and finding out details from the owner or real estate agent and then determines the amount of your mortgage loan. The provider will make sure to pay the owner the agreed amount while you make smaller monthly payments to the provider with interest.
The term of a mortgage loan in South Korea is up to 20 years. If you wish to end a loan earlier than planned, you may do so by refinancing and making bigger payments to the provider or paying back the rest of the borrowed money in full (there may be penalties for early termination). However, if you are unable to make even the minimum monthly payments, it is advised that you call your provider to refinance your loan because failure to pay may affect your credit score.
Korea Housing Bank, a branch of Kookmin Bank, is the country’s leading mortgage lender especially for low and middle-income families. The Housing & Commercial Bank is another popular residential mortgage lender in Korea. Whether you have a local account with these banks or not, they can provide residential mortgage services for you at your request. There are no special privileges or restrictions for foreign clients.