Korean Mortgage Interest Deduction Calculator

This calculator works out how much of the interest on a long-term mortgage taken to buy a home is allowed as an income deduction at year-end settlement in Korea. Enter the interest paid in the year, the home's assessed value at purchase, the loan term, the rate type and repayment structure, any amount already deducted for housing savings, and your marginal tax rate, and you get the deduction ceiling, the actual deduction, and the tax it saves.

What makes this deduction unusual is that the ceiling depends heavily on the loan terms. For the same interest, a long fixed-rate loan repaid in instalments from the start gets a high ceiling, while a variable-rate loan with an interest-only period gets a low one or none at all. So alongside the ceiling for your current terms, the calculator shows how much the ceiling would rise on the best terms.

Employees who bought a home with a mortgage, at year-end settlement. Take the annual interest statement from the bank, enter it, and the deduction appears. The more interest you pay, the more the ceiling matters, so you can also see how much interest is wasted above it.

It is even more useful before the loan is taken. When choosing between fixed and variable rates, or between an interest-only period and immediate amortisation, most people compare the interest rate alone; converting the difference in deduction ceilings at your tax rate can reverse that comparison. The ceiling also changes with a 15-year term versus a 10-year one, so run each option before signing.

The rules are 소득세법 제52조제5항 and 제6항. An employee who heads a household with no home or one home, buys a home whose assessed value at acquisition is ₩600 million or less, and takes a mortgage on it with a repayment term of 15 years or more, may deduct the interest paid in the year from income. The basic ceiling is ₩8 million; it rises to ₩18 million if the loan is either fixed-rate or amortising from the start, and to ₩20 million if it is both. For terms of 10 years or more but under 15, the ceiling is ₩6 million only if the loan is fixed-rate or amortising, and ₩0 million otherwise.

The ceiling is shared with the housing savings deduction. Whatever has already been deducted for housing savings reduces what remains, so calculating the two separately overstates the total. The order is: check the assessed value and household-head conditions to confirm eligibility, look up the ceiling from the loan terms, subtract the housing savings deduction from it, and take the smaller of that remainder and the interest paid as the deduction. Because it is an income deduction, the tax saved is the deduction times your marginal rate.

Suppose you bought a home assessed at ₩500 million with a 15-year fixed-rate mortgage amortising from the start, and paid ₩10 million of interest in the year. On the best terms the ceiling is ₩20 million, and since the interest is within it the full ₩10 million is deducted. At a 15% tax rate that cuts the tax by ₩1.5 million.

Same home, same interest, but a variable-rate loan with an interest-only period: the ceiling drops to ₩8 million. The deduction stops at ₩8 million and the remaining ₩2 million of interest earns nothing. The tax saved is ₩1.2 million, a gap of ₩0.3 million a year from the loan terms alone. For anyone paying more interest, the gap is larger.

The first is entering the purchase price where the assessed value belongs. The test is the official assessed value at acquisition, usually well below the price, so a home bought for more than ₩600 million can still qualify. The second is entering interest on a jeonse deposit loan. The deduction applies only to a loan secured on the home you bought; deposit loans are excluded. The third is a mismatch between the borrower and the owner: the loan and the home must both be in your name, and with joint ownership only the loan matching your share counts.

Continuing to claim in the year you came to own two homes is another error. The condition is being a household head with no home or one home at the end of the tax year, so owning two on that date means no deduction for the year. Claiming the housing savings deduction in full and this one up to its own ceiling is wrong too; they share a ceiling. Finally, refinancing into a shorter term can move you to a lower ceiling bracket or out of the scheme entirely, so check the remaining term before switching loans.