Korean Mortgage Limit Calculator

This calculator works out how much a bank will lend against a home in Korea. Three separate rules set that limit, not one: an absolute amount cap that depends on the house price, LTV, which caps the loan at a percentage of the price, and DSR, which caps it at what your income can service. The calculator computes all three, takes the smallest as the real limit, and tells you which rule is the binding one.

The DSR calculation includes a stress rate. Repayments are computed at the actual interest rate plus a surcharge, which shrinks the limit. You never pay interest at the stressed rate, but your limit is set by it. The calculator also shows what the limit would have been without the stress rate, and therefore how much it cost you.

Anyone setting a budget to buy a home. A plan of "half the price on a mortgage" looks at LTV alone, and if your income cannot carry that much you will be short on closing day. Checking all three limits before signing is what protects the deposit you put down at contract. It is also useful when your income rises or you pay off an existing loan and want to see how much the limit grows.

LTV differs by situation, so pick the value that matches yours. In regulated areas a first-time buyer gets 70%, other buyers with no home 40%, and anyone who already owns a home 0%, meaning no mortgage for an additional purchase. Outside regulated areas it is 70%. The preset buttons in the calculator fill these in.

The amount cap comes from the Financial Services Commission's household debt measures and applies to mortgages in the Seoul metropolitan area and regulated areas: ₩600 million for a home priced up to ₩1.5 billion, ₩400 million up to ₩2.5 billion, and ₩200 million above that. The more expensive the home, the less you can borrow. The LTV limit is simply the price times the LTV percentage. Loan terms may not exceed 30 years.

DSR is the share of annual income taken up by annual principal and interest on all your loans. The calculation runs like this: annual income times the DSR ratio, minus annual repayments on existing loans, gives the annual repayment capacity available for the new loan. Divide by twelve for a monthly payment, then work backwards from that payment, at the actual rate plus the stress rate and over the loan term, to the principal an equal-instalment loan could support. That principal is the DSR limit.

The stress rate is 3 percentage points for mortgages in the Seoul metropolitan area and regulated areas, and 1.5 points for other household loans. The smallest of the three limits is the final limit.

A buyer with no home and an annual income of ₩80 million is buying a ₩1.2 billion flat in a regulated area, with no existing loans, a DSR ratio of 40%, an interest rate of 4.74%, a stress rate of 3 points and a 30-year term. The amount cap is ₩600 million, since the price is within ₩1.5 billion. The LTV limit is 40% of the price, ₩480 million.

For DSR, 40% of income gives an annual repayment capacity of ₩32 million; working back from that at the stressed rate of 7.74% over 30 years gives ₩372.6 million. That is the smallest of the three, so the final limit is ₩372.6 million and DSR is the binding rule. Without the stress rate the DSR limit would have been ₩511.8 million, so the surcharge removed ₩139.2 million.

Budgeting from LTV alone is the most common. In the example above the LTV limit is ₩480 million but the loan actually available is ₩372.6 million. Next is leaving out existing debt. Annual repayments on personal loans, car finance and card loans all count toward DSR, so a zero in the existing-loans field inflates the result. An overdraft facility counts at its full limit.

Stretching the term to lift the limit only goes so far. A longer term lowers the monthly payment and raises the DSR limit, but the ceiling is 30 years. Income evidence is another trap: the income you enter must be what the bank will recognise, from a withholding tax statement for employees or a certificate of income for the self-employed. Finally, this calculator uses the amount cap and the stress rate for the Seoul metropolitan area and regulated areas; elsewhere, switch the stress rate to 1.5 points and bear in mind that the amount cap does not apply.