First-Time Homeowners Get Interest Break

A housing fund for first-time homeowners will temporarily take effect for one year starting November 7, and home leasing or purchase interest rates for needy or low-income households will drop by 0.5 to one percent.

The Ministry of Construction and Transportation (MCT) announced on October 30 that these measures to promote a national housing fund to stabilize low-income household residences would be put in force starting November 7.

Regarding the measures, the MCT decided to lend funds for home purchases to first-time homeowners, defined as households that have never owned a house in their lifetime, through a housing fund system which had been in effective from July 2001 to the end of 2003.

If people with an annual income of 50 million won or less purchase a house 25.7 pyeong (85 square meters) or less in the effective areas, they will be able to borrow up to 150 million won.

The interest rate will be 5.2 percent per year. However, people whose annual income is less than 20 million won can borrow up to 100 million won at a prime rate of 4.7 percent interest, while the interest rate of the excess loan over 100 million won will be 5.2 percent per year.

Those who want to borrow from the fund are required to submit a sales (definitive) agreement, a premise title and registration, a certificate of seal impression, a certified copy of residency, a copy of family registration, and other documents to the National Agricultural Cooperative Federation, Kookmin Bank, or Woori Bank.

The housing fund for low-income households is available to first-time homeowners with an annual income of 30 million won or less who are buying houses 25.7 pyeong or less in effective areas. The loan is limited to 100 million won and the interest rate is 5.2 percent per year. People with an annual income of 20 million won or less can borrow at 4.7 percent interest.

The MCT is also determined to reduce the interest rate on lease funds for needy households and for laborer and low-income households from 3.0 percent per year to 2.0 percent, and from 5.0 percent to 4.5 percent, respectively.

The interest rate for lease funds (40 million won for the metropolitan area and 30 million won for the other areas) for those who have to move out of their own houses due to residential environment improvement projects will be decreased from 3.0 percent per year to 2.0 percent.

Jae-Seong Hwang Jin-Young Hwang jsonhng@donga.com buddy@donga.com