First-time home buyers subject to LTV of 80%

From Monday, first home buyers can lend money with a loan-to-value ratio of up to 80 percent. Also, when those who already own a home take out a home-backed loan to buy another in a regulated region, the period until which they must sell the existing one is extended from six months to two years. The mandate to move to a new home is not effective any longer.

According to the Financial Services Commission on Sunday, a revised monitoring plan to regulate household debt will go into effect from Monday as part of the government’s measures released in June to normalize loan regulation. “This updated regulative framework aims to address actual homebuyers’ inconveniences that have been created with a tighter control of household debt put in place,” said a commission insider.

One of the major changes made starting from August is that those who seek their first home can be offered an LTV ratio of 80 percent regardless of the location and price of their house, while the loan limit is up to 600 million won. Previously, the LTV ratio for houses worth 900 million won or less in speculative or overheated speculation districts was 50 to 60 percent and the one for those worth 800 million won or less in districts subject to adjustment was 60 to 70 percent with a loan limit of up to 400 million won. This policy shift in force is expected to lower the barrier for young home buyers in the house market.

Also, the government has lessened a mandate for home buyers already with a house to sell the existing one in six months and move to a new residence when they take out a house mortgage loan to buy another in a regulated region. People are allowed to sell the existing property within two years without having to move to a new house. The new policy is applied to loan buyers who sign a mortgage plan agreement after Aug. 1.

In case where the deadline of two years for selling of the existing house cannot be met due to any inevitable circumstances such as natural disaster, industrial accidents and the designation of the region where the existing house is located as part of an urban redevelopment project, it can be extended further based on approval of any credit screening committee in financial institutions.


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