What is jeonse, and what is the conversion rate?
In Korea, jeonse is a lease where the tenant pays a large lump-sum deposit instead of monthly rent and gets it back at the end. Leases are often a mix: a smaller deposit plus monthly rent (wolse). The conversion rate is the annual rate used to turn part of a deposit into monthly rent. At 5%, for example, taking ₩100 million off the deposit means paying ₩5 million a year, or about ₩417,000 a month, in rent.
Jeonse-equivalent deposit = deposit + (monthly rent × 12 ÷ conversion rate)
Quick view: rent by conversion rate
The monthly rent you pay for each amount of deposit converted, at each conversion rate.
| Deposit converted to rent | 4% rate | 5% rate | 6% rate |
|---|---|---|---|
| ₩10M | ₩33,333 | ₩41,667 | ₩50,000 |
| ₩50M | ₩166,667 | ₩208,333 | ₩250,000 |
| ₩100M | ₩333,333 | ₩416,667 | ₩500,000 |
| ₩200M | ₩666,667 | ₩833,333 | ₩1,000,000 |
Example
You live on a ₩300 million jeonse, and at renewal the landlord proposes switching to a ₩100 million deposit plus monthly rent, at a 4.5% conversion rate.
- Deposit converted to rent: ₩300M − ₩100M = ₩200 million
- Annual rent: ₩200M × 4.5% = ₩9 million
- Monthly rent: ₩9M ÷ 12 = ₩750,000
Because this is a renewal, check whether it exceeds the legal cap (base rate + 2 percentage points). With a 2.5% base rate the cap is 4.5%, so the proposed rate equals the cap and is legally fine.
The legal cap on the conversion rate
Under Korea’s Housing Lease Protection Act, when part of the deposit is turned into monthly rent during a lease or on renewal, the rate can’t exceed the lower of these two:
- 10% a year
- Bank of Korea base rate + 2 percentage points a year
With a 2.5% base rate, the cap is 4.5%. However, the cap does not apply to new leases; for new leases the landlord and tenant agree freely.
Jeonse or monthly rent — which is better?
Comparing the jeonse-equivalent amount with your loan interest helps. If a jeonse deposit loan rate is lower than the conversion rate, borrowing to raise the deposit may cost less each month. If the loan rate is higher, monthly rent may be better. But jeonse carries the risk of not getting the deposit back, so consider deposit guarantee insurance too.
Frequently asked questions
My landlord is asking for a rate above the legal cap.
During a lease or on renewal, the part above the cap is void, and you can ask for any excess already paid to be returned. If it can’t be resolved, you can apply for mediation to the Housing Lease Dispute Mediation Committee.
Is there a cap when converting rent into a deposit?
The legal cap applies only when a deposit is converted into monthly rent. Converting monthly rent into a deposit is agreed between both sides.
Jeonse or monthly rent — which suits your situation?
Read the jeonse vs rent guideBasis and sources
- Cap on the conversion rate: Korea Law Information Center, Housing Lease Protection Act Article 7-2 and its Enforcement Decree Article 9
- Bank of Korea base rate: Bank of Korea