Converting jeonse to monthly rent is not the landlord's call alone
The rate for converting a deposit into monthly rent cannot exceed the lower of 10% a year and the Bank of Korea base rate plus 2%. Unless the base rate passes 8%, the latter is lower, so in practice it tracks the base rate. On August 27, 2026 the Bank of Korea set the base rate at 3.00%, so the cap today is 5.00% a year. The worked example below uses the 2.5% base rate from the video.
Conditions used in the video
- Deposit being converted
- ₩80M
- Base rate (example)
- 2.5% a year
- Cap ①
- 10% a year
- Cap ②
- base rate + 2% = 4.5%
- Applied
- the lower of the two = 4.5%
Results
- Conversion rate applied
- 4.5% a year
- Maximum monthly rent
- ₩300,000
- Rent demanded (example)
- ₩400,000
- Excess
- ₩100,000 a month
- Over a year
- ₩1.2M
At a glance
Illustrated on a 2.5% base rate. The Bank of Korea changes it from time to time, so check the current figure.
- ① 10% a year (시행령 제9조제1항)10% a year
- ② base rate + 2% (제9조제2항)4.5% a year
lower, so it applies
Why it works this way
Staying on in a home held on jeonse, you may hear this from the landlord: they will return part of the deposit, and you pay that much as monthly rent instead. It is what people call semi-jeonse.
The question is what the monthly rent should be. It looks like something to agree between you, but the law fixes a rate that cannot be exceeded.
Compute both and use the smaller.
- ① 10% a year10%
- ② base rate + 2%4.5% in this example
- Appliedthe lower, 4.5%
The base rate would have to pass 8% for ① to be the lower. Short of that, ② is effectively the cap.
So the cap is not a fixed number. When the Bank of Korea cuts the base rate the cap falls with it, and when it raises the rate the cap rises. A figure you heard last year is no guarantee for this year.
The horizontal axis is the base rate and the vertical the applicable cap. This shows the linkage, not the rate at any particular moment.
- Applicable cap
- 10% a year (fixed)
Unit %
The two lines meet at a base rate of 8%. Below that the rate-linked line stays lower throughout, and only above it does the 10% figure start acting as the cap. Where we live is the left-hand side.
Take an actual computation. At a 2.5% base rate the cap is 4.5%. Converting ₩80M of deposit into monthly rent works out like this.
Find the annual figure, then divide by twelve.
- Deposit converted₩80M
- × 4.5% conversion rate₩3.6M a year
- ÷ 12 months₩300,000 a month
You can reproduce this in the conversion calculator. Put the Bank of Korea's published figure in the base rate field.
If the landlord asked for ₩400,000, that exceeds the cap. It does not void the whole contract. Only the part above the cap is without effect.
Of the ₩400,000 demanded, the ₩300,000 up to the cap stands and the ₩100,000 above it loses effect.
- Up to the cap (valid)₩300,000
- Excess (no effect)₩100,000
₩1.2M over a year
One distinction matters here. This rule caps conversion of a deposit into rent within a subsisting lease. Where the lease ends and both sides agree an entirely new contract, the cap may not apply in the same way. Whether something is a renewal or a new contract is a point that can be disputed.
The other direction works differently. What the law caps is converting a deposit into rent. Converting rent back into deposit is not directly covered and is left to agreement between the parties.
This same rate appears elsewhere. When computing damages where a landlord refused renewal to move in and then let to someone else, the lower of these conversion rates is used to translate the deposit into a monthly figure. That connects to what the renewal right piece covers.
So when conversion comes up, the first thing to do is simple: check the Bank of Korea base rate and add 2%. Anything demanded above that rate is something you can ask them to justify.
The legal basis
Drawn from government announcements and the statutes themselves as primary sources, covering only the relevant part.
주택임대차보호법 제7조의2 (월차임 전환 시 산정률의 제한)
In force in force
Where all or part of a deposit is converted into monthly rent, the rate applied to the converted amount may not exceed the lower of the rate prescribed by presidential decree having regard to bank lending rates under 은행법, and the Bank of Korea published base rate plus the rate prescribed by presidential decree.
What this means
What the monthly rent should be is not purely a matter of agreement, because a cap applies. Compute both measures and compare against the lower.
주택임대차보호법 시행령 제9조 (월차임 전환 시 산정률)
In force 1 July 2026 (Presidential Decree No. 36423, amended by other statute 23 June 2026)
The rate under 제1항 is 10% a year. The rate under 제2항 is 2% a year. The cap is therefore the lower of 10% a year and the Bank of Korea base rate plus 2%.
What this means
Unless the base rate passes 8%, the second is lower. In the present range the cap is effectively base rate plus 2%, and it moves as rates move.
주택임대차보호법 제7조 (차임 등의 증감청구권)
In force in force
No increase may be claimed within one year of the lease or of an agreed increase, and it may not exceed one-twentieth of the agreed rent or deposit. A local authority may set a different figure within that range by ordinance.
What this means
The conversion rate and the increase cap are separate rules. If a renewal raises the rent and converts to monthly rent at the same time, check both caps separately.
Run it on your own numbers
The calculator opens with these conditions already filled in. Change the figures and your own case comes straight out.
Open the Rent Increase Cap Calculator
Frequently asked
What is the conversion cap right now?
It is not a fixed number. It is the lower of 10% a year and the Bank of Korea base rate plus 2%. On August 27, 2026 the Bank of Korea set the base rate at 3.00%, so the cap today is 5.00% a year. The rate can change, so check the published figure at the date of your contract, add 2%, and compare against 10%. The 2.5% in this page's example and in the video is an example. A worked case at today's rate is in the lecture "Landlord asked ₩600,000 a month? The law caps it at ₩500,000".
What if I am already paying above the cap?
Only the part above the cap is without effect; the contract as a whole is not void. Whether you can reclaim it can be disputed on the facts, so use the housing lease dispute conciliation committee or take advice.
Can we exceed the cap if we both agree?
Where a deposit is converted into rent within a subsisting lease, the cap applies even with agreement. Where the lease is ended and an entirely new contract made, it is not a renewal and there is room to see it differently. That distinction is a point of dispute.
Is there a cap on converting rent into deposit?
What the law caps is converting a deposit into rent. The reverse is not directly covered and is left to agreement between the parties.
Where do I find the base rate?
The Bank of Korea publishes it. It changes by decision of the Monetary Policy Board, and when it changes the conversion cap moves with it. Check the figure as at the date of your contract.
What if they raise the rent 5% and convert to monthly rent at once?
Check both caps separately. An increase on renewal cannot exceed 5% (possibly lower under a local ordinance), and the part converting deposit into rent cannot exceed the conversion cap. They are different provisions.
Results are estimates based on the inputs and on the rules as at the stated date. They may differ from a lender's actual assessment, and the rules change often. Take professional advice before any decision that matters.