KHFC to Provide Reverse jeonse Guarantees from February 6

As of February 6, the “reverse jeonse loan” will be introduced, allowing lessors who have difficulties in returning the security deposits to their lessees due to the fall in jeonse prices to obtain a loan from banks to make up for the shortfall.

Korea Housing Finance Corporation (CEO Joo-jae Lim) announced on February 5 that it will adopt this temporary one-year long policy of guaranteeing the return of security deposits to the lessees in an effort to mitigate disputes between lessors and lessees caused by the recent recession in the real estate market.

This product is meant for those lessors who are not able to return the jeonse deposits, but it will be operated in a way that the lessees directly benefit from the system by transferring the proceeds of the loan directly to the bank accounts of the lessees.

The limit per jeonse is 30% of the security depositor KRW 50 million per house.  The ceiling for each person is KRW 100 million.

To benefit from this system, the price of the housing should not exceed KRW 900 million, with no limitations to the meter square area, for up to 4 years under the Housing Act. The guarantee rate of 0.5 – 0.7% will be applied in accordance with the credit ratings of the lessor.

When the amount of the security deposit is less than KRW 30 million, the right to the deposit will not be established. However, the keun mortgage right will be established on the housing if the security deposit exceeds KRW 30 million.

The lessors (owners) wishing to apply for this guarantee can visit the designated banks with necessary documents such as a copy of the lease agreement. The lessors will be able to obtain a loan when their application is approved after undergoing the guarantee evaluation and other required processes.

KHFC said that “the recent economic recession has resulted in falling jeonse prices, making it more difficult for the lessees to get their security deposits back. ” He added that “the jeonse guarantee will prevent disputes between lessors and lessees and contribute to more stable housing for the lessees.”