How to buy a house on a mortgage as a foreigner in Korea
Probably not many of you know that you can buy a house on a low interest mortgage in Korea. Here are general steps you need to go through to own property in Korea
1) Find a reliable, certified English-speaking realtor.
2) Mortgage loan available for a foreigner : around 55% of selling price at 3.6~4.4% interest rate/year.
3) Provide him with your budget and preference for location, house type and anticipated move-in date.
4) Pick some houses out of the realtor-provided list where you can see pictures of houses and their locations with prices.
5) Go together to see the selected houses in person for comparison and final decision.
6) Buy without mortgage : A fact confirmation certificate of your alien registration is required.
7) Buy with mortgage : Seal certificate, proof of employment and a receipt for income tax withholding are required.
8) Get together at the realtor's office to review and sign a contract, paying 10% down payment at the same time and deciding a date for balance payment and move-in.
9) Meet again at the office for balance payment and handover of passcode, card keys and other accessories for the house, and also final check on the house if there are any defects to repair.
10) Apply for gas, electricity, TV and internet
11) A Judicial Scrivener will take care of all legal documentation job on behalf of you and you will receive a registration certificate by a registered amil within 2 weeks. And now you are legally and physically the owner of the house.
For info, acquisition tax is 1.1% for apartment and 4.6% for officetel. There are other costs such as registration fee, mortgage application fee and realtor's commission as well. And they vary depending on the house price but the other costs in total are not more than 1% of the house price in general.
Around 70% of our country's land consists of mountains with residential area that is around 16% only, which indicates that there is always high demands for conveniently located, brand new houses. House prices in Korea have been fluctuating over decades but it has always been upwards in a big picture. So, if you have money that can cover around 50% of your preferred house, it is better to buy one on a mortgage since the house price appreciates a way faster and higher than your salary. Since you have only one house in Korea, if you sell it 2 years after your purchase date, your sale tax will be 100% exempted.
For example, in early 2014, I bought two small apartments located within 10 minutes by walk from a subway station.
X Apt : One bedroom with a big living room and a separate closet, bought at 140 Mil won with around 3 Mil won for tax and other costs. I have had this house rented out on a deposit 20Mil won and 600K won monthly rent since then. So, all in all, the total cost was 143Mil won and my investment was 53 Mil won with 70 Mil won mortgage at 3.6% interest rate. Currently the house is priced at around 195 Mil won(52Mil Margin). I have paid around 7.6Mil won for repayment over last 3 years while my income for the rent over the same years reaches around 21 Mil won. The other Apt is more or less the same as this one.
Most recently, actually yesterday, one of my foreigner customers bought an Apt in HwaMyung at 159Mil won on a mortgage of 85Mil won(3.6% interest rate) with his own investment, 74 Mil won. Two bed rooms, a brand new Apt, 7 minutes by walk from two different subway stations. I hope that he will enjoy the earnings after couple of years as well.
Please do not hesitate to contact me if any questions.
Ricky Choi / A certified realtor in Busan Korea