HF eases repayment burden on financial consumers

- From July this year, a 0.3%p cut in early repayment charges for Bogeumjari Loan and Confirming Loan borrowers (from 1.2% to 0.9%)

-  Graduated Payment to also be available for Bogeumjari Loans with a maturity of 40 Years

Korea Housing Finance Corporation (HF, CEO Choi Joon Woo) announced on June 28, 2022, that it will lower the existing rate of early repayment charges from 1.2% down to 0.9% on July 1, 2022, and introduce the Graduated Payment for Bogeumjari Loans with a maturity of 40 years. This announcement came after the Financial Services Commission unveiled the New Administration’s Household Debt Management and Phasal Deregulatory Measures on June 16, 2022. 

▲ Graduated Payment now available for 40-year Bogeumjari Loans

As part of its efforts to reduce the repayment burden on young adult borrowers with low income during the early period of their loan life, HF has also introduced the Graduated Payment for Bogeumjari Loans with a maturity of 40 years. Graduated Payment refers to a type of payment on a loan in which the payments gradually increase from an initial low base level to a higher final level over the life of the loan. As the income level of young adult borrowers aged up to 39 years is expected to rise over time, these young borrowers are able to opt for Graduated Payment on their Bogeumjari Loan. 

For example, when a borrower takes out a Bogeumjari Loan with a maturity of 40 years, a principal of KRW 300 million, and a rate of 4.6% on the even principal payment schedule, the amount of monthly repayments will be fixed at around KRW 1.37 million throughout the life of the loan. However, if the borrower takes the loan on the Graudated Payment schedule, the first repayment amount will be around KRW 1.17 million, which is KRW 200,00 lower than that of the even principal payment schedule, and the 60th repayment amount will be around KRW 1.24 million, which is KRW 130,000 lower than that of the even payment schedule.  

▲ Rate of early repayment charges down from 1.2% to 0.9%

Furthermore, for Bogeumjari Loans and Conforming Loans to be executed from July 1, 2022, onwards, the existing rate of early repayment charges within three years of the loan execution date, which gradually decreases each day over the three-year period, will be reduced by 0.3% points from the maximum of 1.2% to 0.9%.   

Accordingly, government-sponsored mortgage (Bogeumjari Loan and Conforming Loan) borrowers will save up to KRW 900,000 when they repay their KRW 300 million loan early.  

At the same time, at the end of this June, HF will halt the 70% reduction in early repayment charges on Bogeumjari Loans that it introduced last October. As of April 2022, the amount of its early repayment charge reduction support stands at approximately KRW 3.1 billion. 

HF CEO Choi said, “These measures are designed to meet the goal of the government’s recent livelihood stabilization policy and thereby relieve the financial burden of low- and moderate-income households with real home demand. HF will speed up our multiple system improvement efforts that financial consumers can feel in their real lives in order to relieve their repayment burden amid interest rate hikes.