It really is a crazy system. When foreigners first hear how a korean housing deposit works, they almost always think somebody is trying to scam them, and honestly I cannot even blame them for thinking that. We have this way of renting a home called jeonse. The way jeonse works is you hand over a massive lump sum of money to the landlord in units we call eok, where one eok is a hundred million won, just to hold the place as a deposit. The ratio of that deposit compared to the actual buying price of the home — we call that jeonse-gayul — gets decided differently depending on the market timing, sitting somewhere at several tens of percent of the sale price. For an apartment in Seoul, it is a little over 50% of the buying price, and in the big regional metropolitan cities outside the capital area, it goes up around 70%. Housing contracts here are usually for two years, though if you are getting a wonrum, which is what we call a small studio apartment, people do one-year contracts a lot too.
You do not pay anything every month once that big Korean housing deposit is in. Actually, that’s not quite right — you just don’t pay monthly rent to the landlord, because the building maintenance fee is completely separate. We call that fee gwanlibi, and it covers all the building upkeep and bills that still come out of your pocket every month. If you live in a place like an officetel, which is basically a studio or small apartment building mixed with office units, once you add up electricity, water, the shared building internet, and cleaning fees, you can easily burn through several hundred thousand won every single month just on that. Still, it is way less of a financial burden than paying pure monthly rent.
About the money
There are also plenty of places where you put down a deposit and pay monthly rent — what we call wolse — at the same time. In Seoul, it changes a lot depending on the neighborhood and how old the building is, but you very often see a 10 million won deposit with 600,000 to 700,000 won a month in rent. If you look in the central districts or over on the Gangnam side, it gets way more expensive than that. The thing is, foreigners looking for a room here for the first time can usually afford the monthly rent they have to pay each month, right, that part is fine, but they do not have that 10 million won deposit they need to hand over at the very start and they go into total menbung, which is our word for a mental breakdown. And if you have not been in Korea very long, you sometimes get blocked right at the paperwork stage because of visa issues or your foreign resident registration.
For an apartment in Seoul, a jeonse deposit runs from several hundred million won all the way up to well over a billion won. Even if you just take the average, it goes past 700 million won! Landlords take that huge pile of cash and use it for gap-tuja, which means gap investing. Basically they put in less of their own money and stack the tenant’s jeonse deposit on top to buy the property. The catch is that when housing prices drop or they cannot find the next tenant to move in, giving that deposit back turns into a massive headache.
Even for the exact same size home, the deposit is completely different depending on where the building sits. If we measure by what people here call gungmin-pyeonghyeong — literally the “national standard size” everyone uses as the benchmark — that is 84 square meters of actual living floor space, or what we commonly call 34 pyeong. Pyeong is the old floor area unit Koreans still use every day when talking about apartments, I’m not sure why we still use both numbers, we just do. Anyway, if you look at actual jeonse transaction prices per square meter, Seoul is around 8.85 million won, the sudogwon capital region — which puts Seoul, Gyeonggi, and Incheon together — is 6.22 million won, and jibang, meaning the regional provinces outside the capital area, is around 3.41 million won. Multiply that by 84 square meters and Seoul comes out to about 740 million won, the capital region is around 520 million won, and the provinces are about 290 million won. It is the exact same size apartment, and Seoul is 2.6 times the price of the provinces. If you step down one size to 59 square meters, which people call 25 pyeong, Seoul is around 540 million won, the capital region is close to 400 million won, and the provinces are about 170 million won, so the gap goes past three times.
What happens before moving day
From the moment you pick a house all the way to the day you move in, the order of how you do things is pretty much set. When a place you like shows up, before somebody else snatches it away from you, you send a provisional holding deposit called gagye-yakgeum first. You send this just to lock the room down before the real contract signing, and it is usually around 1 million to 2 million won, or up to 3 million won on the high end.
Before you send a single won, though, you pull the property registry document first, which is called deunggibu-deungbon. It is the official government record for the property, and you pull it yourself from the Supreme Court Internet Registry website. You have to look through two parts on it called gapgu and eulgu — Section A for ownership and Section B for debts — to figure out if the landlord is actually the real owner and how much geunjeodang, which is a prior mortgage or collateral loan that gets paid back ahead of you, is already stuck on the house. On the day you sign the contract, you pull a fresh copy again and check that the debt has not grown in the meantime.
A few days later, when you sit down to write the official contract, you transfer 5% to 10% of the total deposit as the formal contract down payment, the gyeyakgeum. This money has to go straight to a bank account under the landlord’s own name. Once you write up the contract, you can go to a place like the local jumin-senteo — the neighborhood community office — and get a hwakjeong-ilja. That is an official date stamp on your contract proving when it was signed. The real estate agent fee goes out separately too. The law sets an upper cap on that fee, so if your jeonse deposit is between 100 million and 600 million won, the cap is 0.3%, and if it is between 600 million and 1.2 billion won, it is 0.4%. On a 200 million won jeonse, you pay at most 600,000 won, and on a 700 million won place, it is 2.8 million won.
People who are putting a loan into the deal take that contract with the hwakjeong-ilja stamp on it and go to bank. At the very latest, you have to apply within three months from whichever comes earlier between your final balance payment day and your move-in date. Going by the rules for the Beotimmok loan — that is the main government-backed deposit loan — you have to turn in your ID, the contract stamped with the hwakjeong-ilja, a receipt showing you paid at least 5% of the deposit, a deunggibu-deungbon property registry pulled within the last month, both your jumin-deungnok deungbon and chobon — which are your full household registration sheet and your personal address history sheet — plus employment and income papers, and your national health insurance eligibility confirmation certificate.
The final balance day, which we call jangeum-nal, is the busiest day of all. You pull the deunggibu-deungbon registry one more time to see if any trouble popped up in between, and if everything looks clean, you wire the remaining balance and get a receipt. Usually for moving day people go into their mobile banking app ahead of time to open up their daily transfer ceiling all the way to the max, and right when the movers are hauling the furniture out, they shoot the whole balance over in one transfer.
That same day, before you even unpack your boxes, you file your move-in address report — called jeonip-singo — at the jumin-senteo office or online through the Jeongbu24 government portal. Explain it simply, jeonip-singo tells the government you officially live at that address now. If you did not get your hwakjeong-ilja date stamp earlier, you get it together right then. Once you actually move into the house to live there and finish the jeonip-singo, starting the very next day you gain legal opposability power as a tenant, which we call daehangryeok, and you need to have the hwakjeong-ilja stamp on top of that so if the building ever goes to auction, you can collect your deposit ahead of creditors who came after you. That is the bare minimum requirement just to protect your place in line.
There is one more report you have to do. If your deposit is over 60 million won or your monthly rent is over 300,000 won, you have to file a lease report called jeonwolse-singo within 30 days of signing the contract. It does not cover the entire country, though, so out in rural county areas — what we call gun districts — there are places where you do not have to report it. Originally the landlord and the tenant are supposed to file it together, but if one side digs their heels in and refuses to do it, you can just file it by yourself.
Where do people get that kind of money?
Almost nobody is just walking around holding that whole deposit in raw cash. If your age, your income, and the house conditions match up, you take out a bank loan or a government-supported jeonse deposit loan. The limits are all different, but as long as you qualify, you borrow a massive chunk of the deposit. Even though the cost moves around with interest rates, paying loan interest to a bank is still cheaper than handing raw monthly rent over to a landlord every month. Even for the exact same room, paying interest and hanging in there leaves you ahead financially, which is why people put up with all the annoying document screening and bend over backward to get a jeonse place.
On the government side, the main program is the Beotimmok jeonse deposit loan, and beotimmok literally means a support beam that props something up. It is meant for a non-homeowning head of household whose combined couple annual income is 50 million won or less, with net assets of 345 million won or less. For newlyweds, they let the income cap go up to 75 million won, and if you have two or more kids, they allow up to 60 million won. The home itself has conditions attached too. The actual living floor area has to be 85 square meters or under, and the deposit has to be 300 million won or less in the capital region and 200 million won or less in the provinces, though if you are newlyweds or have two or more kids, it goes up to 400 million won in the capital region and 300 million won in the provinces. As for how much you can borrow, the cap is 120 million won in the capital region and 80 million won in the provinces, and it cannot go over 70% of the jeonse price. For newlyweds or families with two or more kids, that limit jumps to 250 million won in the capital region and 160 million won in the provinces, up to 80% of the deposit. The interest rate sits between 2.5% and 3.5% a year, and if the house is in the provinces they shave 0.2 percentage points off. If you compare those rules to the 84-square-meter average prices we looked at earlier, Seoul and the capital region do not even qualify at all, and even the provinces go over the 200 million won limit for regular households.
When you convert a deposit into monthly rent, the ratio they use is called jeonwolse-jeonhwanyul. Going by apartments, Seoul is around 4.7% a year, the capital region is 5.2%, and the provinces are about 5.8%. So if you take 100 million won off the deposit and pay that amount as monthly rent instead, it works out to around 390,000 won a month in Seoul, 430,000 won in the capital region, and 480,000 won in the provinces. There is a legal cap on this conversion rate too, which is whichever is lower between 10% a year and the Bank of Korea base rate plus 2%. Because the base rate is 3%, the cap is 5%. Since the Beotimmok loan rate is 2.5% to 3.5%, for that same 100 million won, taking on debt to put it in as deposit costs you less every month than paying rent.
People also use banjeonse a lot, which literally means half-jeonse, where you put down a big deposit to shave down your monthly rent. They adjust the split between deposit and rent to match either the legal conversion rate or whatever the going market rate is in that neighborhood.
Foreigners are not completely shut out of these rules either. It is written right in the law that foreign resident registration and reporting a change of place of stay take the place of Korean resident registration and the jeonip-singo move-in report. And foreigners can also sign up for deposit guarantee insurance from the Korea Housing and Urban Guarantee Corporation, which everyone here calls HUG.
Not getting wiped out
The risk of getting your deposit stolen exists as a hard fact. We have this word, kkangtong-jeonse — kkangtong means an empty tin can — which is when the jeonse deposit plus the senior debts ahead of you add up to more than what the building is actually worth, so even if the house gets sold off you cannot get all of your deposit back, and then there are also flat-out scams where people set out to trick you from the very beginning. If the landlord goes bankrupt, the tenant loses their entire life savings and gets stuck holding hundreds of millions of won in jeonse loan debt on top of it. You can end up sitting on a mountain of debt and having to go through bankruptcy proceedings yourself.
That is why people buy deposit guarantee insurance. The main one is the product from HUG. To get it, your deposit has to be 700 million won or less in the capital region and 500 million won or less in the provinces, and you have to actually live in the home with your jeonip-singo and hwakjeong-ilja already done. Your deposit plus any debt ahead of you in line has to stay within 90% of the house price, and that prior debt by itself cannot go over 54% of the house price. The contract period has to be at least one year, it has to be a contract written through a licensed real estate agent, and you have to apply before half of the contract period has passed. The insurance fee for an apartment runs between 0.097% and 0.164% a year. On a 300 million won apartment jeonse, if the deposit and prior debt together are relatively low compared to the home value, it comes out to around 642,000 won for two years. If you look back at that Seoul 84-square-meter average of 740 million won we talked about earlier, it goes past the 700 million won capital region cap, so you cannot even sign up for it. When you do have the insurance and the landlord cannot pay you back, you file a claim with the agency and collect the money from them instead.
When your two years are coming to an end, there are rules on the tenant’s side too. Between six months and two months before the contract finishes, if the tenant says they want to stay for another term, the landlord cannot refuse without a legitimate reason. You can use this renewal claim only once, and it runs for two years at a time, so counting your first two years you live there for four years total. When you renew like that, they can only raise the deposit by up to 5%. The landlord can refuse if they, or their parents, or their children are going to move in and live there themselves, but if they use that excuse and then rent the place out to somebody else without a valid reason before those two renewal years would have ended, they have to pay damages to the tenant. Also, even if you write a contract for one year, the law counts it as two years anyway, and whether to live there for just one year and leave is up to the tenant to pick.
If the contract ends and the landlord still does not give your money back, you must never just pull your jeonip-singo address registration out and leave. All the priority standing in line you spent years securing can get wiped out overnight. You have to go to court and apply for what is called an imchagwon-deunggi-myeongnyeong, which is a court leasehold registration order that locks your claim onto the building record, and you only move your stuff out after you have checked with your own eyes that your right is officially written onto the property registry.