Korea DSR Calculation: From Existing Credit Debt to a New Mortgage Limit

With ₩50 million of annual income accepted by the lender and ₩8 million of existing annual debt service, a 40% bank DSR ceiling leaves ₩12 million a year for a new mortgage. That supports about ₩150.31 million of principal over 30 years at a 7% assessment rate with level monthly payments. The calculation starts with the regulatory repayment amount for your existing debt, then converts the remaining annual budget into principal.

When the 40% DSR limit applies and which income counts

The debt service ratio (DSR) is annual principal and interest covered by the rules divided by annual income accepted by the lender. The borrower-level ceiling generally applies when total household borrowing, including the requested loan, exceeds ₩100 million: 40% at banks and 50% at nonbanks. Credit lines count at their committed limit when testing that threshold; exempt loan categories have their own treatment. A smaller loan still undergoes the lender's own affordability checks. See the Financial Services Commission's borrower-level DSR questions and KB Kookmin Bank's explanation.

For a borrower in Korea, “annual income” means the amount the Korean lender accepts from your documents, rather than the cash deposited into your account. The Financial Supervisory Service's banking rules, Appendix 18 prioritize documented income, such as a withholding receipt (근로소득원천징수영수증) or income certificate (소득금액증명). Where that proof is difficult to provide, lenders can estimate income from other records. The rules distinguish income inferred from National Pension or health-insurance contributions (인정소득) from income estimated using evidence such as card spending (신고소득). These estimates are subject to discounts and caps. Combining a spouse's income also brings the spouse's financial debt into the calculation.

Under the ordinary rules, lenders count 95% of income estimated from pension or health-insurance contributions and 90% of income estimated from spending or other reported evidence. Both methods generally have a ₩50 million annual cap. DSR-specific provisions allow the lender to use the lower income estimate from two or more sources, up to ₩70 million. A separate provision allows 100% of income estimated from employment-based insurance contributions, without the ₩50 million cap, when incorporated into bank policy. These are alternative ways to establish income for assessment; the estimates are not added to documented salary.

The example assumes a continuing employee whose documented ₩50 million income has been accepted, with no future-income uplift. The August 2026 announcement's tighter averaging of sharply rising income starts on January 1, 2027; it is not used early here. If you are comparing a Korean job offer with your repayment budget, Korean take-home pay explains why the deposit in your bank account is lower than the salary figure. This example does not assume that a particular visa grants a 30-year loan term.

Why an interest-only credit loan counts as ₩8 million of annual debt service

Assume you took out a bullet unsecured loan in 2024, still owe ₩32 million at 5%, and have no other debt. “Bullet” means the principal is due at maturity. Your current cash interest is about ₩133,333 a month. Korea's DSR calculation also allocates the principal across a regulatory five-year maturity:

The five-year assumption does not change your repayment contract. Nor does an annual renewal turn the divisor into one year. The FSC's question 17 distinguishes bullet credit loans from qualifying installment credit: no grace period, monthly or quarterly equal installments, at least 40% of principal repaid in installments, and a recognized maturity within five to ten years.

This borrower has less than ₩100 million of unsecured credit, so no credit-loan stress add-on applies. For that add-on, the lender tests total credit-loan balances, including new credit. For the general ₩100 million DSR threshold, it also counts other covered debt, including the requested mortgage. A borrower can therefore be subject to DSR without a stress add-on on the existing credit loan.

Add the applicable interest to these principal amounts. Appendix 18's Table 3 explains how to count existing debt. Its exemption list serves a different purpose: identifying specified loans that can be issued without the usual DSR assessment. Such a loan can still count as existing debt when you later apply for an ordinary mortgage. Auto installments, for example, appear in both the origination exemption list and the existing-debt repayment table.

Exempt originations include specified interim construction and relocation loans, inclusive-finance products, loans of ₩3 million or less, insurance-policy loans and deposit-backed loans. Jeonse funding loans do not contribute principal. Since October 29, 2025, interest on new jeonse loans taken by one-home owners renting in metropolitan or regulated areas enters DSR; unchanged renewals and qualifying pre-rule contracts receive transitional treatment. A loan secured against an existing jeonse deposit is a different category, with principal divided by four years. None of these exempt-product cases is used in the worked example.

Convert the remaining annual budget into principal

₩50 million × 40% gives ₩20 million of total annual capacity. Subtract ₩8 million for the existing loan, leaving ₩12 million a year, or ₩1 million a month, for the new mortgage.

For level monthly payments, let r be the monthly assessment rate and n the number of months. Principal P = ₩1,000,000 × [1−(1+r) to the power −n] ÷ r. At 7% over 30 years, r=0.07÷12 and n=360, giving P=₩150,307,568. The assessed new payment is ₩1 million a month. Adding its annual ₩12 million to the existing ₩8 million gives a 40% DSR.

“Level payments” is 원리금균등: the combined principal and interest payment is constant. “Equal principal” is 원금균등: the principal installment is constant and interest falls with the balance. Its larger early payments support less principal under a first-year budget. The equal-principal column uses first-year service = P × [12/n + r × (12−66/n)], with interest charged on the balance before each payment. The first payment exceeds the ₩1 million monthly average. For a bullet mortgage assessed over the maximum ten years at 7%, ₩12 million ÷ (1/10 + 0.07) gives about ₩70.59 million. Dividing only by the interest rate would omit the recognized principal.

The July–December 2026 regional and rate-type rules

The FSC's guidance valid July 1–December 31, 2026 and the Korea Federation of Banks' June 30 release retain phase-two treatment outside metropolitan and regulated areas through year-end. “Metropolitan” means Seoul, Gyeonggi and Incheon. A regulated location outside those three still uses the metropolitan/regulated column.

The add-on is the reference stress rate multiplied by the phase factor and rate-type factor. The reference is 3% for metropolitan/regulated mortgages and 1.5% otherwise; mortgages outside both have a 50% phase factor through December 31. Five years is less than 30% of a 30-year term, giving mixed factors of 80%/60% and periodic factors of 40%/30%, respectively.

Other fixed periods or reset intervals use different factors. A period below five years has a 100% factor. A period of at least five years that also covers at least 70% of the loan term has a zero factor. For periods between 30% and 50% of the term, mixed-rate factors are 60% in metropolitan or regulated areas and 40% outside both; periodic-reset factors are 30% and 20%, respectively. Between 50% and 70% of the term, mixed-rate factors are 40% and 20%, and periodic-reset factors are 20% and 10%, in the same regional order. For credit balances above ₩100 million, the reference stress rate is 1.5%. The factor is zero for credit with a rate fixed for the full term of at least five years, 60% for a full-term fixed rate of at least three but under five years, and 100% otherwise. Officetel-backed loans follow the mortgage rules for each rate type.

The table assumes a new 2026 contract with no grandfathering. The guidance retains earlier rules for qualifying contracts and deposits completed by June 30 or October 15, 2025, and specified earlier project announcements. Its 4% contractual rate is a comparison assumption, not a live bank quote. On the variable mortgage principal of ₩150,307,568, the contractual payment at 4% is about ₩717,591 a month, while the assessed payment at 7% is ₩1 million. The difference is not an extra interest bill.

Compare the DSR ceiling with the property's LTV limit

Suppose the property costs ₩400 million and a loan-to-value (LTV) limit of 40% applies under the ordinary regulated-area rules. Before prior claims or tenant-deposit deductions, the collateral ceiling is ₩160 million. The variable-rate DSR ceiling of ₩150.31 million is lower, leaving about ₩249.69 million of the purchase price to fund from other sources, plus transaction costs. Property-price caps, purchase eligibility, occupancy requirements and bank underwriting can further constrain the loan. The calculation gives a ceiling under these assumptions; the bank still has to approve the application.

Paying down ₩10 million of the credit loan from your own funds would reduce its recognized annual service to ₩5.5 million: ₩4.4 million principal plus ₩1.1 million interest. New annual capacity becomes ₩14.5 million, supporting about ₩181.62 million at 7% over 30 years. But the same property's assumed LTV still caps borrowing at ₩160 million. Paying off credit helps most when DSR is the binding constraint.

When comparing banks, give each the same accepted income, credit balances or limits, repayment methods and fixed-rate period for the new mortgage. If a bank counts annual debt service other than ₩8 million for the existing ₩32 million credit loan, check which principal amount, regulatory repayment period and interest it used. For your household cash budget, start with salary after tax and Korean social-insurance deductions, then subtract the actual contractual payments.

Rules checked November 2, 2026. Principal amounts were calculated using monthly amortization; bank day-count conventions and rounding are omitted. All borrowing figures remain in KRW because the debt and income being assessed are Korean-won amounts.