Why DSR and LTV Matter
When buying a home or getting a lease loan in Korea, DSR (Debt Service Ratio) and LTV (Loan to Value) are the most important factors determining your loan limit. Understanding these two metrics lets you calculate how much you can borrow in advance.
Understanding LTV (Loan to Value)
LTV is the maximum loan amount as a percentage of the property value.
LTV = (Loan Amount ÷ Property Value) × 100%
| Zone | Area | LTV Limit | Notes |
|---|---|---|---|
| Speculative Overheated | Most of Seoul | 40% | 20% for portion over 900M |
| Adjustment Zone | Some Gyeonggi | 50% | - |
| Non-regulated | Other areas | 70% | - |
| First-time buyer | All areas | 80% | Under 600M + income conditions |
LTV Calculation Example
Buying a 1B KRW apartment in Seoul (speculative overheated zone):
- Up to 900M: 900M × 40% = 360M
- Over 900M: (1B - 900M) × 20% = 20M
- Maximum LTV-based loan: 380M KRW
Understanding DSR (Debt Service Ratio)
DSR is the ratio of annual loan repayments (all loans) to annual income.
DSR = (Annual Repayments for All Loans ÷ Annual Income) × 100%
DSR Calculation Example
Annual income 60M KRW, existing credit loan payment 300K/month:
DSR 40% annual repayment capacity: 60M × 40% = 24M KRW
Existing credit loan annual repayment: 300K × 12 = 3.6M
Additional annual repayment capacity: 24M - 3.6M = 20.4M
Monthly: ~1.7M KRW → ~380M KRW loan possible (30yr, 3.5%)
DSR vs DTI
| Aspect | DSR | DTI |
|---|---|---|
| Calculation scope | All loans (principal + interest) | Mortgage P+I + other interest only |
| Other loans | Both principal and interest | Interest only |
| Strictness | More strict | Relatively lenient |
How to Maximize Your Loan Limit
- Pay off existing loans: Clear credit loans and card debt to improve DSR.
- Extend loan term: 30→40 years reduces annual repayment and DSR.
- Document all income: Include bonuses and side income in official income verification.
- Joint ownership: Dual-income couples can use combined income for DSR.
- First-time buyer benefits: Up to 80% LTV for first-time home buyers.
Loan Limit Comparison by Scenario
| Conditions | LTV Limit | DSR Limit | Actual Limit |
|---|---|---|---|
| 50M income, Seoul 800M, no existing loans | 320M (40%) | 360M | 320M |
| 80M income, Seoul 1B, 30M credit loan | 380M (40%) | 320M | 320M |
| 60M income, non-regulated 500M, no existing loans | 350M (70%) | 430M | 350M |
The actual loan limit is the lower of LTV and DSR limits.