[Edaily Reporter Choi Jeong Hoon ] Following the government’s decision to increase the tax burden on non-resident single-homeowners through tax reforms, it has also signaled plans to tighten financial regulations, drawing attention to the extent to which jeonse loans will be restricted. As measures are being considered to restrict not only new loans but also the extension of existing loan maturities, the key issue is how to distinguish genuine borrowers who are unable to live in their own homes due to job transfers, their children’s education, or medical treatment.

According to financial industry sources on the 5th, the Financial Services Commission is reviewing a plan to include restrictions on jeonse loan guarantees for non-resident single-homeowners as part of supplementary measures for real estate lending. While technical reviews and reports to the Presidential Office are largely complete, the announcement schedule has not been finalized as the final decision on the scope of exceptions for genuine homebuyers and the level of regulation has been delayed.

At present, the primary options under consideration are restricting new jeonse loan guarantees for non-resident single-homeowners or reducing the guarantee limit. Measures to restrict the extension or refinancing of existing loans upon maturity are also being reviewed. Rather than applying the regulations uniformly to all single-homeowners nationwide, the focus is on targeting owners of apartments in the Seoul metropolitan area and regulated regions.

Under the current system, single-homeowners can obtain jeonse loans of up to 200 million won in the Seoul metropolitan area through public guarantees. Financial authorities believe that the structure of renting out one’s own home and then using a jeonse loan in another region can lower housing ownership costs and support the purchase of homes for investment purposes.

Although the outstanding balance of jeonse loans is on a downward trend, it still exceeds 120 trillion won. The outstanding balance of jeonse loans at the five major commercial banks fell from 123.3554 trillion won in July of last year to 122.2046 trillion won in March of this year, and further to 120.5690 trillion won at the end of last month. This represents a decrease of 2.7864 trillion won (2.3%) over the past year. However, since these statistics also include loans to non-homeowners, they do not directly reflect the loan volume for non-resident single-homeowners.

On the 3rd, the government announced tax reform measures to differentiate the tax burden between owners of a single residential home and owners of a single non-residential home. The basic exemption for the Comprehensive Real Estate Tax will be raised from 1.2 billion won to 1.4 billion won for owners of a single residential home, while it will be lowered to 900 million won for owners of a single non-residential home. The special long-term holding deduction for capital gains tax will also be restructured into a “long-term residency income deduction,” which grants benefits based on the actual period of residence rather than the holding period.

If the same principle is applied to the financial sector, owners of a single non-residential home will face an increased property tax burden while also finding it more difficult to secure jeonse loans. However, the challenge in designing this policy lies in the fact that it is difficult to categorize all owners of a single non-residential home as purely investment-driven.

President Lee Jae-myung also emphasized the need to adjust jeonse loans for homeowners during last month’s public forum on real estate policy, while stating that those who temporarily vacate their homes due to work or their children’s education should be treated the same as actual residents. He also proposed using the term “residential” to reflect the purpose of home ownership, rather than “actual residence.”

Financial authorities are exploring measures to recognize exceptions to the regulations for reasons such as job transfers, school enrollment, caring for parents, and medical treatment. Key issues include whether to recognize a spouse’s job transfer, whether to include enrollment in elementary and middle school under “children’s education,” and whether living nearby—rather than moving in with parents—should be considered “caring for parents.”

Current income tax laws already include special provisions recognizing enrollment in school, job changes or transfers, medical treatment or convalescence lasting one year or more, and transfers due to school violence as unavoidable reasons for non-residence. However, since financial institutions must assess the necessity of funds during the loan origination and renewal stages, they are likely to apply stricter criteria than those in tax law. Factors such as the security deposit for the existing home, the security deposit for the new jeonse residence, and whether the borrower actually resides there may also be taken into consideration.

Within the financial sector, there is a view that rather than blocking new and existing loans all at once, jeonse loans should be gradually reduced by phasing out public guarantee limits and lowering guarantee ratios. This is because a blanket restriction on extending the maturity of existing loans could force borrowers to repay their loans or move out of their current residence within a short period.

A banking industry official stated, “Applying the measures gradually starting with new loans while granting existing borrowers a sufficient transition period can minimize market shock,” adding, “Eligibility criteria and required supporting documents must be clearly defined to ensure that banks do not apply exceptions inconsistently.”