- KHFC to raise guarantee limit to 2.5 times couples’ annual income and offer 0.1% discount in guarantee fee from August 31, 2009

As of August 31, 2009, newlywed couples who have been married for 5 years or less will be eligible for a jeonse (home rental) loan of up to 2.5 times their annual income.     

To assist newlywed couples secure housing and begin a stable life, the Korea Housing Finance Corporation (KHFC, CEO Joo-jae Lim) established this special guarantee support plan that will be implemented from August 31, 2009.

Previously, the guarantee limit for jeonse loans allowed up to 1 to 2 times the borrower’s annual income depending on repayment ability. The special guarantee support plan raises that limit for couples married for 5 years or less (including engaged couples) to 1.5 to 2.5 times their annual income, an increase of up to 50%. KHFC has also decided to raise the guarantee limit for applicable individuals by a lump-sum increase of KRW 10 million for housing purchase loans depending on their credit ratings.

Under the previous regulations, newlywed couples with an annual income of KRW 28 million were eligible for up to KRW 56 million in loans under KHFC’s jeonse loan guarantee. By raising the guarantee, the new plan allows them to borrow up to KRW 70 million.

In addition to raising the guarantee limit, the guarantee fee rates, which range from 0.3% to 0.7% depending on type, will be modified for newlywed couples with rates ranging from 0.2% to 0.6%, a discount of 0.1 percentage points. Their guarantee fee burden will thus be reduced by up to 33% compared to other households. 

KHFC expects 52,000 newlywed couples to benefit from the raised guarantee limit and guarantee fee discount under the new plan each year.

Initially, the guarantee products for newlywed couples will be offered from August 31, 2009 through 5 commercial banks in Korea: Woori, Nonghyup, Shinhan, Hana, and IBK banks. When the necessary IT system is developed, KHFC will expand its range to other commercial banks.

“Due to the effects of the financial crisis, the number of newborns has recently dropped, and young couples’ reluctance to have children is becoming a severe social issue,” said a KHFC official. He added, “Hopefully, the new preferential guarantee plan targeting newlyweds and multi-children households will contribute to relieving the low birth rate problem in Korea.”