Thursday, 28th September 2023

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“Where do you get the money?” ‘Reverse jeonse’ landlord’s breath… Receive 1.7 billion more loans

In order to solve the reverse jeonse crisis (a phenomenon in which deposits cannot be returned due to a drop in jeonse prices), the government will relax regulations on deposit return loans for landlords from the end of this month. For individuals, a total debt service ratio ( DTI ) of 60% is applied instead of a total debt service ratio ( DSR ) of 40%. It means that the DSR regulation will not be applied

so that you can get a loan for the amount of the difference in the deposit that is insufficient due to the decrease in the rental price . A case was also presented in which the ability of a landlord with an annual salary of 50 million won (interest rate of 4%, maturity of 30 years) increased by nearly 200 million won by applying a DTI of 60% . According to the ‘2nd half economic policy direction’ announced by the government on the 4th, from the end of July, loan regulations will be eased only for the purpose of returning the difference in deposit for one year. For individuals, DTI 60% is applied instead of DSR 40%, and rental business interest payment ratio ( RTI ) is lowered from 1.25 to 1.5 times to 1 times. DTI calculates only the principal and interest of mortgage loans and other loans as repayment amount, but DSR includes principal of other loans. The target of this countermeasure is the landlord who is in a reverse jeonse situation due to the return of the deposit. Relevant housing types include apartments, townhouses and multi-housing as well as residential officetels.

As a rule, the loan amount is supported within the difference of the deposit. For example, if the Jeonse deposit, which was previously 500 million won, has now dropped to 400 million won, DTI is applied instead of DSR when borrowing within the limit of 100 million won . However, if a subsequent tenant cannot be found, a Jeonse deposit loan within the loan limit is also carried out under the premise of a special agreement (priority repayment of the loan with the subsequent tenant Jeonse deposit). As a result, applying DTI 60% instead of 40% DSR increases the ability of landlords to obtain loans. 60% of DTI is at the level of special Bogeumjari loan return loans. For example, in the case of an individual multi-homed person with a 4% loan interest rate and an annual income of 50 million won with a 30-year loan maturity (no existing loan), the loan limit of 350 million won when a DSR of 40% is applied increases to 525 million won when a DTI of 60% is applied. Under the same conditions, individual multi-homed people with an annual income of 100 million won can borrow up to 1.05 billion won, an increase of 350 million won. RTI is the rental income divided by the cost of the loan. A rental business with 5 houses is RTI

With a downward adjustment, the loan limit increases by 375 million won from 1.5 billion won to 1.875 billion won in the case of a deposit of 500 million won per house in a situation where the loan interest rate is 4% and the deposit interest rate is 3%.

A policy to reduce the burden of housing costs was also included. In order to return the real estate tax burden to the level before the housing price surge (2020), the comprehensive real estate tax fair market value ratio will be maintained at last year’s level먹튀검증 (60%).

The fair market value ratio is the ratio of the published price that determines the tax base for comprehensive real estate tax. The tax base for comprehensive real estate tax is calculated by subtracting the amount of basic deduction from the publicly announced price of a house owned by each individual and then multiplying by the fair market value ratio. The Moon Jae-in administration raised the ratio to 95% (by 2021), but it was lowered to 60% after the launch of the Yoon Seok-yeol government in May of last year.

In addition, the government raises the annual payment limit for applying the comprehensive housing subscription savings income deduction (2.4 million won → 3 million won). In addition, from July, the deposit refund guarantee fee of up to 300,000 won will be fully supported for young people. The sunset of tax support for landlords who have reduced rent for small businesses will be extended from the end of this year to the end of next year. Up to 70% of the rent reduction is deducted from income tax or corporate tax.

The government is also promoting improvement of the 3 lease laws, such as the right to apply for contract renewal, the monthly rent reporting system, and the monthly rent ceiling system. The government is in the position that the enforcement of the 3rd Lease Act had a significant impact on the recent reverse tax crisis. Deputy Prime Minister and Minister of Strategy and Finance Choo Kyung-ho pointed out at a press conference in May, “Since the passage of the so-called 3rd Lease Act in the second half of 2020, it has emerged as a social concern as the rental price skyrocketed with a two-year contract cycle.”

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