The accommodation financing system in Korea is quite different than the west.
In respect to mortgages, it's not like back in western countries. Korean banks favor lending to businesses and corporate clients, moreso than private consumers.
The 3 accommodation options that are available to homeowners are:
- Wolse 월세 (renting)
- Jeonse 전세 (leasing)
Wolse literally means "monthly money" and is also called sageulse (사글세). Little or no down payment is entrusted to the owner, and instead rental fees must be paid every month. When leasing a home, it is safer to work through a real estate agent.
Wolse (월세, 月貰) is bascially the Korean equivalent of the western concept of renting. A weolsae rental agreement with a Korean real estate agency (known as budongsans, usually involves paying a small upfront deposit (key money) and a higher monthly rent. The higher the deposit, the lower the monthly rent is. Generally, each one million in deposit will lower the monthly rent by 10,000 Won, and sometimes one will be able to negotiate a deposit down somewhat with a proportionally higher rent.
Most budongsans advertise wolsae deposits in the neighborhood of 5-20 million won, however, as a foreigner you can easily find budongsans that cater to English speakers who are only here from 6 months to a year and have lower deposits. In Seoul, the areas with cheaper weolsae are traditionally in the expat burgs of Itaewon, Hongdae, Shinchon, and Yongsan. As for the rest of Korea, it's very easy to find foreigner-friendly budongsans around US military bases.
From a traditional Korean perspective, wolsae living is often frowned upon. If you don't have jeonsae accommodation or own your own home outright, Koreans may think you are poor. Koreans often live at home until their late 20s or early 30s until they are married and get a place of their own, and during that time, they are able to save and conserve funds very easily, as opposed to westerners who often permanently move out of their parental homes as soon as they go off to college or start their careers. This renting/living disparity is one of the more profound differences between Korean and western culture. Especially if you are a foreigner marrying a Korean and you have to justify to the Korean in-laws over why you are unable to drop 100 million Won on an apartment after the marriage, and explain that wolsae-style living is fairly common for western newlyweds.
Jeonse literally means "money in full" and is sometimes called "key money" in
English. It is where a specific, large sum of money is entrusted to the owner of the
home and no monthly rental fees are paid to the owner. The contract period for a
jeonse lease is usually two years.
To westerners, Jeonse(전세, 全貰, often seen romanized as 'chunsae') is more similar to leasing than anything. In a jeonsae agreement, the lessee will put down a big deposit (key money) along the lines of 60%-80% of the property value, but it can be more or less, depending on the situation and size and location of the accommodation. In return, you can live rent-free, while only having to pay bills. The financial benefit for the landlord is that they then take your big deposit and invest it in high-yield investments and bonds for the life of your agreement.
Is just how it sounds. Outright ownership. If you can afford this, then it's time for you to look into buying another and try to start capitalizing on the lucrative rental income industry in Korea.
A bojeungin (guarantor, 보증인) is someone who assumes responsibility for the actions of the individual leasing the home in question. You should ask a person you are close to, someone who has work and a stable income, to act in this capacity. Your school or company might be able to serve as guarantor in some circumstances.
Contract forms (gyeyakseo, 계약서) may be supplied by the real estate agent or found at stationery stores or photocopying shops. Commercially sold contract forms that are generally all the same, but additional issues that have been agreed on by both sides may be added as well.
In Korean contracts, one's legally recognized personal seal (ingam dojang, 인감도장) is considered more important than your signature. These are made of wood, stone, or some other hard material and have your name carved in one end. A person can have many personal seals, which are just called dojang (도장), so you should have documents from a government office proving that the dojang you
are going to use is your officially recognized ingam dojang.
A contract deposit (gyeyakgeum, 계약금) might be entrusted to the owner of the home at the time the contract is signed, as an expression of your commitment to not violating the terms of the contract. Since the amount of a contract deposit is determined by the rate of the lease, the more money being paid for the lease as either jeonse or wolse, the larger the contract deposit is going to be. Special care must be taken when there is a contract deposit involved, since if the terms of the
contract are violated by the person leasing the home, the owner does not have to return the money given as a contract deposit. The owner only has to return the money given as jeonse in the case of jeonse lease agreements.
Management Charge and Utilities
In addition to the standard monthly rent, there may be a 'management charge' or gwallibi (관리비) for the upkeep of the building. This charge can be thought of as part of the rent. On top of that, you may have to pay utililties or in may be included in the management charge. The utility charges for officetels tend to be higher than those of one rooms. If the utilities are included in the management charge, the management charge may increase during the summer months to account for increased air conditioning use.
중개수수료 (Joong-gae-soo-soo-lyoh) - Brokerage Commission. Once the deposit has been exchanged and your contract with the owner has been signed, you must pay the real estate agent a fee as commission. The amount can vary widely, but it is usually on the order of half of the monthly rent. Be sure to discuss the fee before signing the contract, as they are likely to name a lower fee to ensure that you sign the contract with them.
Things To Check At Contract Signing
- Contract Period (계약기간) : Usually two years. Make sure you understand the process for extending the contract after the initial period is over.
- Payment Method (집세지불) : Make sure you have clarified how any monthly fees must be paid, and what happens in case you are late in payment.
- Restrictions (금지사항) : Prior to signing, discuss with the owner whether there are any restrictions or prohibitions involving the use of the home you are renting.
- Items to Confirm (확인사항) : See a copy of how the structure is legally registered (deunggibu deungbon 등기부등본) and whether the owner has any serious debts (집주인의 대출관계).
When Contract Problems Occur
If things go wrong with the contract agreement, the Korea Real Estate Brokers Association (대한공인중개사협회) office in your area or the free legal consultation window (무료상담창구) at the regional court will be able to tell you if you might be able to win compensation.
- 보증금 (bojeunggeum, 保證金) - deposit
- 이자 (利子, ija) - interest
- 방세 (房貰, bangse) - monthly rent
- 중개수수료 (Joong-gae-soo-soo-lyoh) - Brokerage Commission. Once the deposit has been exchanged and your contract with the owner has been signed, you must pay the real estate agent a fee as commission. The amount of this brokerage is determined by law.