Bank group clarifies loan rules

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Bank group clarifies loan rules

The Korea Federation of Banks on Wednesday released guidelines aimed at clearing up confusion caused by the government’s new restrictions on mortgages for homeowners in so-called speculative areas.

The bank association guidelines specify the exceptions to the ban on mortgages for these speculative areas, which includes all of Seoul and Sejong.

According to the bank association, mortgage loans can be given to owners of single apartments living in these areas if they agree to sell their current apartment within two years and move into the new apartment within a month of receiving the loan.

However, if they fail to sell the apartment, the homeowner will be banned from taking out a mortgage for the next three years even if they pay off the initial loan.

Owners of multiple apartments in the speculative areas are completely banned from receiving new mortgages under the government’s measures, which were announced on Sept. 13.

Owners of apartments who do not plan to sell their first apartment after buying another must provide a valid reason for buying the apartment, such as allowing grandparents to live close to the family to take care of grandchildren while the parents work, to qualify for a mortgage.

In this case, a loan can be given only if the apartment is worth less than 900 million won. The person taking out the loan must sign a contract promising that the family will live in both apartments and not rent it out.

The homeowners must turn in documents that prove that the children are not yet capable of taking care of themselves, such as a kindergarten attendance record, as well as documents proving relation.

If one spouse needs to purchase an apartment due to work relocation, a fresh mortgage loan will be approved.

The person has to provide documents that demonstrate the relocation area and they must live in the newly-purchased apartment.

Other exceptions include taking out a mortgage to buy an apartment to relocate near a medical facility due to a family member’s illness or living in a separate area for the children’s education.

In both cases, those who take out a mortgage to purchase an apartment must prove their reasons for buying the additional apartment.

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