In the midst of rising interest rates, individuals are faced with the dilemma of choosing between monthly rent (월세) and lump sum deposit (전세) as the interest rates for lump sum deposits have become comparable to monthly rent. With this context, the article discusses the factors and pros and cons of opting for either monthly rent or lump sum deposit when considering a housing choice.
To illustrate, let's take the example of Kim Toss, who has 50 million won and is looking to buy a 200 million won property. Kim's options are as follows:
1. A monthly rent of 625,000 won with a 50 million won deposit, which is called "월셋집" (a combination of 월세 and 전세).
2. A lump sum deposit of 200 million won, called "전셋집."
1. Choosing Monthly Rent:
Opting for the 월셋집 requires a monthly payment of 625,000 won. The advantage here is that the existing 50 million won deposit can be used, and there is no need to take out a separate loan or pay interest. The current trend is shifting towards higher proportions of monthly rent, making 월셋집 options more readily available. However, it's essential to note that despite lower monthly rent, higher maintenance fees are becoming common due to the implementation of the "Lease 3 Law," which requires landlords and tenants to report contracts with specific criteria to the authorities.
2. Opting for Lump Sum Deposit:
Choosing 전셋집 requires obtaining a loan of 150 million won (excluding the 50 million won deposit). A recommended approach is exploring government-backed loan programs like the "Youth Lump Sum Deposit Loan" and the "Support Pillar Lump Sum Deposit Loan." These loans offer lower interest rates compared to private banks, although they have specific eligibility requirements. If government loans are not feasible, individuals can consider private bank loans, although these might come with slightly higher interest rates. In the example provided, the calculated interest for government loans is 24,000 won per month for the 1.2 billion won borrowed, while for the remaining 300 million won from a private bank loan, the interest is 125,000 won per month.
In summary:
1. Opting for 월셋집 results in a monthly payment of 625,000 won.
2. Opting for 전셋집 with a combination of government-backed and private loans can significantly reduce monthly housing costs to 365,000 won to 562,000 won, compared to 월셋집. However, choosing 전셋집 involves careful examination to avoid the risk of not receiving the full deposit back from the landlord, known as "깡통전세 피해."
The article emphasizes the importance of considering individual financial situations and evaluating various factors when making a housing decision, whether it's opting for monthly rent or lump sum deposit. The choice depends on factors such as the specific financial products available, interest rates, eligibility criteria, and long-term financial planning.