Options for Mortgage Crunch Sufferers
Jin, 36, is concerned about 150 million won of a remaining balance, which he should pay by July 5 to complete his apartment purchase contract.
Shinhan Bank told him that loans are not available until the end of June because the Financial Supervisory Service (FSS) made action to restrict mortgage loans.
It is not certain whether the regulation will be lifted in July. A bank clerk in charge of loans said, We have to wait and see.
As loan services are halted in main banks, there are more than a few people in trouble. In particular, those who must pay remaining balances by the end of June are at a loss about what to do.
What options are out there for those in trouble?
Bogeumjari Loans Made More Competitive
If your apartment price is under 600 million won, you may want to consider Korea Housing Finance Corporations bogeumjari loans (old mortgage loans). The restrictions on home loans do not apply to bogeumjari loans. The interest is fixed, so you do not have to worry about the possibility of an interest increase.
Bogeumjari loans whose interest was one percent higher than bank mortgage loans have not been popular so far. More than 300 billion won was loaned in 2004 and 2005, but only 86 billion won has been loaned out this year.
However, such loans have gained more competitive power as its interest rate was lowered by 0.3 percent on June 12. The interest rate ranged from 6.6 to 6.85 percent depending on the loan term, but it was lowered in uniformity by 0.3 percent. With the payment of process fee of collateral security and 0.5 percent of the down payment charged, the annual interest rate on 10-year maturity loans will be lowered to 6.1 percent.
The interest rates for the low-income (an annual income of less than 20 million won) or no-house group range from 5.3 to 6.0 percent.
The interest rate on new mortgage loans available in banks is a little over five percent, but the difference in interest rates between bank mortgage loans and bogeumjari loans disappears when the interest rate reaches up to six percent as the initial low rate as a bait is raised later.
Check Your Qualifications for First-Time-Ever Loans
If you qualify, first-time-ever loans have an advantage. The loans are available at Kookmin Bank, Woori Bank, and the National Agricultural Cooperative Federation, but the restrictions on home loans do not apply since these loans are sponsored by the governments national housing fund.
The current interest rate is 5.7 percent. For couples whose annual income is under 20 million won, the interest rate is lowered to 5.2 percent. For those with more than three children, it is 0.5 percent lower.
However, the bar is set very high. A couples annual income should not be over 30 million won. No one in the household should have any record of house ownership. Loans are restricted to houses less than 25.7 pyeong priced less than 300 million won.
A maximum of 150 million won can be loaned with an option of a one-year deferred payment (only interest paid with payment for the principal deferred) and 19-year loan term, or of three-year deferred payment and 17 year loan term.
Check Foreign Banks and Insurance Companies
Loans from foreign banks such as Citibank Korea, SC Korea First Bank, or Korea Exchange Bank are possible since they have more room in the total amount of loans presented by the FSS for each bank.
Their interest rates and payment conditions are not much different from those of banks whose loan services were halted.
The interest rate on Citibank Koreas new ace long-term mortgage loans for less than 25.7 pyeong houses is currently 4.99 to 5.45 percent, and that on SC Korea First Banks first home loans is 5.44 to 6.74 percent. Insurance companies such as Hyundai Marine and Fire Insurance and Kyobo Life Insurance offer mortgage loans with interest rates in the five percent range. However, insurance companies interest rates on mortgage loans are usually one percent higher than bank mortgage loans.
Jin-Young Hwang Kyung-Joon Chung buddy@donga.com news91@donga.com
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