In Korea, jeonse means paying a large lump-sum deposit instead of monthly rent and getting it back when the lease ends; wolse means a smaller deposit plus monthly rent. Jeonse looks cheaper because nothing goes out each month, and monthly rent looks convenient because no lump sum is tied up. But jeonse has its own “invisible rent”: loan interest and the opportunity cost of the deposit. You have to put the two on the same basis to judge properly.
How to compare the real cost of housing
When comparing jeonse and monthly rent, convert both into the actual cost per month.
Monthly cost of rent = monthly rent + (deposit × deposit rate) ÷ 12
Money tied up in a deposit gives up the interest it could have earned in a savings account, so this “opportunity cost” must be counted as a cost for a fair comparison.
A worked comparison
A. Jeonse of ₩300 million (₩100 million of your own + a ₩200 million jeonse loan at 4% a year)
B. A ₩50 million deposit + ₩1 million monthly rent
Assume a savings rate of 3% a year.
| Item | A. Jeonse | B. Monthly rent |
|---|---|---|
| Loan interest (monthly) | ₩666,667 | ₩0 |
| Opportunity cost of your money (monthly) | ₩250,000 | ₩125,000 |
| Monthly rent | ₩0 | ₩1,000,000 |
| Actual monthly cost | ₩916,667 | ₩1,125,000 |
Under these conditions jeonse is about ₩210,000 a month cheaper. But if the loan rate rises 1 percentage point, jeonse’s monthly cost grows to about ₩1.08 million and the gap almost disappears. If you qualify for the monthly rent tax credit, the rent side becomes cheaper by that much too. Because which option wins changes with interest rates, it is important to calculate with the rates at the time you sign.
How much rent would a deposit convert to?
Calculate rent conversionPros and cons of jeonse and monthly rent
Jeonse
- Pros: monthly housing costs are low when rates are low. You get the whole deposit back when the lease ends.
- Cons: requires a large lump sum. If house prices fall or the landlord runs into trouble, you risk not getting the deposit back on time.
Monthly rent
- Pros: smaller lump-sum burden and lower risk of an unreturned deposit. If you qualify, you can get the monthly rent tax credit in year-end settlement.
- Cons: a fixed monthly outgoing reduces what you can save. When rates are low it is often more expensive than jeonse.
Safety checklist before a jeonse lease
Because jeonse deposits are large, checking before you sign matters more than anything. Go through these items one by one.
- Check the property register: anyone can obtain it from the Supreme Court’s online registry. In section A (gap-gu), check that the actual owner is the person you are signing with and that there are no seizures or provisional seizures; in section B (eul-gu), check the amount of any mortgage. It is safest to check again on the signing day and on the day you pay the balance.
- Make sure the deposit isn’t too high for the market price: if the mortgage plus your deposit exceeds 70–80% of the property’s value, that is a warning sign. Check the sale price too.
- Check the building register: illegally extended “violating buildings” may be refused for jeonse loans or deposit guarantee insurance.
- Check whether the landlord owes taxes: if the landlord is behind on national or local taxes, the taxes may be settled before your deposit. Before signing, a tenant can view the landlord’s unpaid taxes.
- For multi-unit houses, check senior deposits: if one building has many tenants, also check the total deposits of tenants who moved in before you.
- Verify who you are signing with: check that the ID matches the owner on the register, and if signing with an agent, get a power of attorney and a certificate of the owner’s seal. Always send the deposit to an account in the owner’s name.
What to do after signing
- Move-in report and fixed date: do it on moving day. A move-in report gives you opposing power from midnight the next day, and a fixed date (hwakjeong ilja) lets you get your deposit back in order of priority in an auction. You can do both online through Government24.
- Get a jeonse deposit return guarantee: with a guarantee product from Korea Housing & Urban Guarantee Corporation (HUG), Korea Housing Finance Corporation (HF) or SGI Seoul Guarantee, the guarantor repays you if the landlord doesn’t return the deposit.
- Watch the renewal window: renewal must be discussed between six and two months before the lease ends. A tenant can use the right to request renewal once, and the deposit increase is then capped at 5%.
This article summarizes general information and doesn’t replace legal advice on any specific lease. Before signing, also use a licensed real estate agent or public counseling services such as the Housing Lease Dispute Mediation Committee.
References
- Supreme Court Internet Registry Office property registers
- Korea Housing & Urban Guarantee Corporation (HUG) jeonse deposit return guarantee
- Government24 move-in reports and fixed dates
- Korea Law Information Center Housing Lease Protection Act