[김혜순의 슬기로운 금융생활] From the 1st of next month, when receiving a home mortgage loan for a house worth more than 600 million won or a credit loan of 100 million won or more in a regulated area such as Seoul, the total debt repayment ratio (DSR) of 40% will be applied. From July next year, even if the total loan amount exceeds 200 million won, it will be subject to DSR regulation. In July 2023, the DSR regulation will be fully applied to all borrowers with a total loan of 100 million won or more.
▷ What is DSR?
-DSR (Debt Service Ratio) is the ‘total debt principal and interest repayment ratio’, which means the ratio of the total financial debt principal and interest repayment ratio to the annual income of the person who wants to get a loan.
Here, financial liabilities include all loans such as mortgage loans, credit loans, and card loans. Income can be documented with wage and salary income withholding tax receipt, income amount proof, business income withholding tax receipt, pension certificate, etc., but for housewives, students, freelancers, retirees, etc. Income can be calculated based on data such as , rent, and card usage.
DSR is a number that indicates how much the borrower’s loan principal and interest repayment amount to all financial companies bears a burden relative to their income. The lower the number, the higher the repayment ability. The government’s strengthening of DSR regulations is intended to be more strict about repayment ability when lending.
How is DSR calculated?
-For example, if Mr. A, whose annual income is 50 million won, has to repay 30 million won each year, his DSR is 60%. Assuming that office worker B, with an annual income of 50 million won, has no other loans, he can get up to 422 million won if he receives a mortgage loan with an annual interest rate of 2.5%, a 30-year maturity, and equal repayment of principal and interest. If the maturity is reduced to 20 years, the limit will also be lowered to 315 million won. If you borrow the same amount of money, it is advantageous to secure the loan limit by holding the maturity longer. An office worker with an annual income of 20 million won can borrow up to 126 million won and 169 million won, respectively, for 20-year and 30-year loans.
▷Strengthening DSR regulations would be disadvantageous for the low-income youth.
– When calculating the DSR of young people, the financial authorities decided to calculate the expected average annual income until the maturity of the loan and reflect this in the loan limit. The criteria for future income recognition were specifically specified in the ‘Administrative Guidance for Risk Management Standards for Household Loans’ announced on the 10th. The content is that if you are a homeless person who has submitted proof of earned income and the future income of the borrower and his/her spouse is expected to increase, the annual income can be calculated by reflecting the increase.
▷ What is the existing DTI (Debt to Income)?
-DTI is the ‘total debt repayment ratio’, which means the ratio of repayment of principal and interest on a home equity loan and interest repayment of other loans to a person’s annual income. There is a difference in whether the DSR calculates only the interest or the principal and interest payments on other loans, excluding the mortgage, in a stricter way than the DTI. In the past, when receiving a mortgage from a bank, the repayment capacity was calculated assuming that even if there was already a loan from another financial institution, ‘only the interest would be paid’. Until now, there were many deferred loan products in which only interest was paid immediately and the principal had to be repaid at maturity, and for credit loans, there was no major problem because extension of the maturity was taken for granted. However, as household debt has risen sharply, the government is encouraging amortized loan products that repay the principal and interest together.
▷ How will DSR and DTI be applied in the future?
– For DTI, 40% of speculation/overheated speculation districts and 50% of adjustment target areas are applied. However, when low-income and end-users receive a mortgage loan, they can receive preferential treatment up to 20% in speculation and over-speculation districts and 10% in areas subject to adjustment. However, a bank official said, “The DSR conditions are much stricter than the DTI, and from July, if you just meet the DSR, the DTI will be automatically adjusted.” “The 40% DSR regulation by borrower will weaken the meaning of DTI.”
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