The government's total management measures aimed at curbing the increase in household loans are disrupting the funding plans of homebuyers who have already entered the market in line with real estate policies and regulations. As mortgage limits decrease and credit loans become more restricted, instances are emerging where loans that were available at the time of contract are now being denied at the time of payment.
A 40-year-old office worker, identified as A, purchased a distressed property in a land transaction approval zone in early May, just before the end of the grace period for the capital gains tax on multiple homeowners. A planned to secure funding through a mortgage of 600 million won, a credit loan, and personal savings, with the intention of completing the payment by September 5 to meet residency requirements.
However, within two months, KB Kookmin Bank reduced the mortgage limit for home purchases to a maximum of 300 million won, disrupting A's plans. A was informed that, due to total management conditions, obtaining a mortgage might not be possible until around September 20, prompting A to explore additional funding options with other financial institutions.
Concerns are growing that similar confusion may arise among borrowers who purchased distressed properties just before the end of the capital gains tax grace period. The government encouraged multiple homeowners to list their properties for sale and mandated residency in land transaction approval zones, but the total management measures from banks have made it difficult for buyers to complete transactions within the designated timeframe.
The issue with total management is that, beyond the borrower's repayment ability and collateral value, the remaining lending capacity of financial institutions significantly influences whether loans are granted. Even if borrowers meet the loan-to-value (LTV) and debt service ratio (DSR) requirements, banks can still deny loans by lowering their internal limits or delaying applications. When both mortgage and credit loans are tightened simultaneously, the entire funding plan established at the time of contract is inevitably disrupted.
Financial authorities are aware of the potential impact on existing borrowers' final payment loans and are taking action. Following a national discussion on real estate, they met with banking officials to discuss ways to maximize the supply of final payment loans to borrowers who have already signed contracts. Subsequently, Shinhan Bank and KB Kookmin Bank allocated additional final payment loan limits for the Palusid complex near Maegyo Station in Suwon, indicating that banks are also moving to expand supply. However, it remains uncertain whether the limits on mortgages and credit loans applicable to individual housing sales contracts will be relaxed.
The discrepancy between regulatory intentions and on-the-ground results is also evident in the second-tier financial sector. While financial authorities excluded borrowers with annual incomes below 35 million won from total management, some capital companies have begun restricting new loans for low-income borrowers and self-employed individuals who struggle to provide income verification, following tightened management of auto loans. This suggests that as capital companies rapidly reduce their total lending, they are prioritizing the reduction of loans for higher-risk or less verifiable borrowers. Measures intended to protect low-income loans have inadvertently raised barriers for vulnerable borrowers.
* This article has been translated by AI.
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