A view of apartment complexes in Gangnam District (foreground) and north of the Han River in Seoul, as seen from Maebawi Rock on Cheonggyesan Mountain in Seongnam, Gyeonggi Province.
Korea Bans Gap Investment: Mortgage Loans Capped at ₩600 Million in Greater Seoul, 6-Month Move-in Rule Starts June 28
Starting June 28, South Korea will implement strict new mortgage regulations in Greater Seoul and other regulated areas, effectively banning gap investment—the practice of buying homes with tenants in place. The mortgage loan capwill be set at ₩600 million (~$430,000), and homebuyers must move into the purchased property within six months of receiving the loan.
These measures, part of the government's “Strengthened Household Debt Management Plan”, were announced by the Financial Services Commission (FSC) following an emergency policy meeting on June 27. The goal: curb speculative investment and reduce excessive debt related to real estate purchases.
Key Policy Changes Effective June 28:
1. Mortgage Cap of ₩600 Million in Regulated Areas
For home purchases in the Seoul metropolitan area and regulated zones (speculative, overheated, and price-controlled districts), housing loans will be limited to ₩600 million.
While interim payments are exempt, the cap applies when loans are converted to final settlement mortgages.
2. Mandatory Move-In Within Six Months
All mortgage holders in regulated areas must move into the home within 6 months.
Previously, move-in requirements were loosely enforced or set at 2 years; now the rule applies strictly to all relevant loans.
Borrowers who fail to comply will lose their repayment grace period, triggering immediate loan recall.
This effectively bans non-occupant purchases and gap investments unless the buyer lives in the property.
3. Reduced LTV Ratio for First-Time Buyers
Loan-to-Value (LTV) ratio for first-time homebuyers in regulated areas will drop from 80% to 70%.
This reverses a previous policy under the Yoon administration that had eased LTV limits to 80% to help new buyers.
Example: For a ₩500 million home, maximum borrowing will now be ₩350 million, down from ₩400 million.
4. Move-In Requirement Now Applies to First-Time Buyers
First-time homebuyers previously exempt from occupancy rules must now also move in within 6 months.
The requirement will apply to policy-backed loans as well, including Bogeumjari and Didimdol loans.
5. Tighter Lending Rules for Multi-Homeowners
Two or more home owners in regulated areas will be barred from taking out additional mortgages.
Single-homeowners looking to buy an additional property without selling their existing home will also face a mortgage ban.
If the existing home is sold within 6 months, they will be treated as first-time buyers and can borrow under the standard LTV rules: 70% in non-regulated areas, 50% in regulated zones.
Why This Matters
These new rules signal a major policy shift toward strengthening real occupancy requirements and curbing speculative real estate practices. The government is taking a firm stance against financial risk stemming from housing debt, even if it means tightening benefits for first-time buyers. The era of tenant-leveraged home purchases—known as “gap investment”—is effectively over, at least in Korea’s high-demand housing markets.
Korea Expands Ban on Gap Investments: Jeonse Loans in Regulated Areas Now Restricted, Loan Caps Tightened Across the Board
In its latest crackdown on speculative real estate practices, the South Korean government will ban Jeonse loans linked to property transfers in Greater Seoul and regulated areas, effective June 28. This move targets buyers and pre-sale subscribers who attempt to use Jeonse deposits (a unique Korean rental deposit system) to finance purchase balances — a common technique in “gap investment” strategies.
Jeonse Loan Ban in Regulated Areas
The ban on Jeonse loans tied to ownership transfers is designed to close a loophole that allowed buyers to purchase properties using tenants' deposits rather than personal funds. This type of leveraged speculation has been cited as a major contributor to housing market inflation.
"Jeonse (Key Money Deposit Lease) is a unique housing rental system in South Korea where the tenant pays a large, lump-sum deposit — typically 50–80% of the property's market value — to the landlord instead of monthly rent. The landlord holds this deposit for the duration of the lease, usually two years, and returns it in full when the lease ends, assuming no damage or violations. During the lease, the landlord can invest or use the deposit, and the tenant benefits from rent-free living."
Nationwide Tightening of Household Debt Quotas
Beginning in July, South Korea will cut its annual household debt quota across all financial institutions by 50%compared to previous targets. Government-backed policy loans will also be reduced by 25% of their original annual supply plans. As a result, mortgage availability will be significantly tightened across the board, regardless of borrower type or institution.
Banks’ self-regulated lending restrictions — previously applied unevenly — will now be standardized across all financial sectors, including secondary lenders.
Reduced Limits on Government-Backed Loans
Loan ceilings for popular government housing programs like Didimdol (purchase loans) and Bogeumjari (rental loans) will be lowered:
General Didimdol Loan: From ₩250 million → ₩200 million
First-Time Homebuyer Didimdol and Youth Bogeumjari: From ₩300 million → ₩240 million
Newlywed Didimdol Loan: From ₩400 million → ₩320 million
Newborn Support Didimdol: From ₩500 million → ₩400 million
These loans, offered at below-market interest rates, have been criticized for fueling home price hikes by enabling borrowers to secure large sums with minimal equity.
Jeonse Loan Guarantee Ratio Reduced
Effective July 21, the loan guarantee ratio for Jeonse loans in regulated areas will drop from 90% to 80%, compelling banks and lenders to adopt stricter screening for rental-related lending. This change is intended to prevent over-leveraging in areas with elevated market risks.
Policy Implementation & Grace Periods
The new regulations (except for the Jeonse guarantee ratio cut, which takes effect July 21) will be enforced from June 28. However, the Financial Services Commission (FSC) has promised transitional rules to protect borrowers who:
Signed purchase or rental contracts before June 28, or
Completed loan applications prior to the deadline.
Possible Expansion of Regulated Zones
The government is also considering expanding regulated zones, such as speculative and overheated districts, and is in discussions with the Seoul Metropolitan Government to broaden land transaction permit zones. These changes may be part of a comprehensive real estate policy package to be announced as early as next month, following a formal review by the Ministry of Land, Infrastructure and Transport.
Political Reaction
At a recent press conference, the Democratic Party’s Policy Chair urged the government to act decisively:
“We must immediately normalize lax lending practices in light of interest rate conditions, household debt concerns, and the need to protect real homebuyers. The government should expedite plans for housing supply, third-generation new towns, and public redevelopment projects.”
A major housing supply plan is expected to follow soon.
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