Even Those Who Once Owned a Home May Qualify as "First-Time Buyers"—Exceptions for Inheritance and Presale Rights to Be Set

[Financial News] Even people with a history of homeownership may become eligible for first-time homebuyer mortgage benefits if unavoidable circumstances, such as inheritance or canceled presale rights, are recognized. Since banks have been reluctant to approve such loans due to the lack of clear criteria, financial authorities have decided to directly establish exceptions.
According to the financial industry and financial authorities on the 20th, financial authorities are expected to issue an authoritative interpretation of the "unavoidable reasons" that would allow the first-time homebuyer loan-to-value ratio (LTV) to apply even to applicants with a history of homeownership. The Korea Federation of Banks is collecting banks' inquiries, and financial authorities plan to promptly establish criteria, starting with cases commonly raised by the industry.
Under the August 13 real estate measures announced last month, financial authorities allowed the first-time homebuyer LTV to apply, subject to review by a financial company's credit review committee, when unavoidable circumstances exist, such as inheriting a share of a home while still a minor. The first-time homebuyer LTV is 70% in the Seoul metropolitan area and regulated areas and 80% in non-regulated areas.
The problem was that it remained unclear how far the term "unavoidable reasons" extended. Although financial authorities left the matter to banks' discretion, banks took a cautious approach because they feared being criticized during future inspections for recognizing exceptions on their own.
Accordingly, the authoritative interpretation is expected to cover cases in which applicants held presale rights after a project was canceled but never actually acquired a home, as well as cases in which applicants dispose of an inherited share of a home before applying for a first-time homebuyer mortgage loan.
The clarification of the exception criteria could determine whether genuine homebuyers qualify for loans at a time when first-time home purchases have surged. Last month, the number of registrations by first-time buyers of apartments, row houses and officetels, among other properties, in Seoul reached 9,343—the highest in six years and the most since August 2020. First-time buyers also accounted for 53.8% of purchases of collective buildings in Seoul, the highest level since related statistics were first published in 2010.
By contrast, the review of exceptions for "speculative nonresident single-home owners" seeking jeonse loans is expected to cause relatively little confusion. Financial authorities have restricted jeonse loans for people who rent out apartments in the Seoul metropolitan area and regulated areas without ever living in them, while allowing exceptions through a credit review committee when unavoidable reasons, such as caring for parents or relocating for work, are recognized.
Banks believe they can apply existing criteria for determining genuine housing needs, as standards already exist for circumstances such as caring for parents or relocating for work. Ultimately, the key point of the authoritative interpretation is to avoid uniformly denying first-time homebuyer benefits solely on the basis of a history of homeownership. Financial authorities are expected to set clear boundaries on how far to assist genuine homebuyers whose ownership history arose for reasons beyond their control, such as inheritance or a canceled project.


[email protected] Kim Hyun-jung Reporter