People shopping for a loan start with “how much do I need”. The branch starts somewhere else — “how much are we allowed to lend you” — and the answer is set by DSR. Korea’s Financial Services Commission defines it in one line: annual principal and interest on all household debt, divided by annual income.
1. Where is the line? 40% at banks, 50% at non-banks. The FSC’s own FAQ adds “the same in regulated areas” — designating an area does not tighten DSR. What tightens is LTV and the hard cap.
2. What eats the limit? The stress rate. Since July 2025 it is 1.50%, and it is an add-on used only to compute DSR — you never actually pay it.
3. Why does the bank’s number differ? Because the regulation hands the method and the detailed criteria to the supervisor (art. 29-2(3)). That is exactly why the calculator below has a separate box for the assessed term.
The calculator returns your remaining headroom in won and, on the same inputs, the limit you would get with the stress rate switched off. The gap between those two numbers is what the rule removed.
| Item | Annual repayment | Of income |
|---|
“Assessed term” may not be the real term. The supervisory regulation hands the method of computing DSR and the detailed criteria to the Governor of the Financial Supervisory Service (art. 29-2(3)), and credit and other loans are converted to a set period rather than their contractual term. We could not read that rulebook, so rather than hard-code a figure we left it as a box you can change. If your bank quoted a term, use theirs. Some lending — jeonse loans, interim payments, policy microfinance — is treated differently in the DSR calculation, and none of those exceptions are modelled here. This is an estimate, not a credit decision.
The figures this calculator uses, and where they come from
| Item | Value | Source |
|---|---|---|
| Definition of DSR | Annual principal and interest on all household debt ÷ annual income | FSC, May 2026 |
| Ratio cap | 40% banks · 50% non-banks, same in regulated areas | FSC 15 Oct measures FAQ |
| Stress rate | 1.50% (stage 3, in force 1 July 2025) | FSC, May 2025 |
| Stage 2 figure | 0.75%, applied to regional mortgages for a limited period | same release |
| Repayment method | Equal total payments — the same amount each month | our assumption, our own calculation |
| Assessed term | An input — deliberately not hard-coded | supervisor’s rulebook (not read) |
It is not counting interest alone. The numerator is principal and interest. Because repaid principal is in there, a short loan eats DSR even when the balance is small. How much the repayment method changes total interest is laid out in the loan repayment calculator.
The stress rate is not money you pay
Financial Services Commission on the stress DSR — “considering the possibility that repayment burden rises through the life of the loan if rates increase, an add-on rate is imposed when DSR is computed”.
A companion release from the same body adds, in brackets, “not charged on the actual loan rate”.
Those two lines are the whole of it. The rate is inflated only while the limit is being sized; the interest you actually pay is unchanged. So the accurate sentence is not “rates went up 1.5 points” but “the amount you may borrow went down”.
| Stress rate | Limit | Difference |
|---|---|---|
| 0% (comparison) | about KRW 221.0m | — |
| 0.75% (stage 2) | about KRW 202.6m | −KRW 18.4m |
| 1.50% (stage 3) | about KRW 186.4m | −KRW 34.6m |
Income of KRW 50m, an existing credit loan of KRW 30m at 5.50% over five years, a new loan at 4.30% over 30 years — our own calculation. 1.50 points removed KRW 34.6m. No rise in rates, no fall in income, and the number still shrinks.
The same run shows something else worth noticing. That KRW 30m credit loan consumes 13.8% of DSR. The balance is only 60% of annual income, but a five-year term pushes roughly KRW 6m of principal through the ratio every year. Of the 40% allowance, 13.8 points are gone and 26.2% — KRW 13.1m a year — is what remains. In DSR the heavy thing is not the balance but the term.
Passing DSR is not the only test
A mortgage in Korea meets three rulers at once. Article 29-2(1) of the Regulation on Supervision of Banking Business lists them side by side — loan-to-value (LTV), debt-to-income (DTI) and debt service ratio (DSR) — and says banks “shall comply”.
- LTV cuts against the price of the house. In a regulated area an ordinary borrower gets 40%.
- DTI divides mortgage principal and interest plus interest on everything else by income. It attaches to apartments in regulated areas.
- DSR divides principal and interest on every household loan by income. It does not change with the area.
On top of those sits a hard cap by house price — in regulated areas, KRW 600m up to a KRW 1.5bn house, KRW 400m from 1.5 to 2.5bn, and KRW 200m above that. No level of income gets past it. The real limit is the smallest of the four. Where this calculation sits in the buying sequence is set out in the order to check before buying.
Jeonse loans are not measured here
Jeonse loans are treated differently in the DSR calculation and are outside this calculator. What banks actually charge for them is measured in the jeonse loan rate article, and whether jeonse or monthly rent works out cheaper is in jeonse versus monthly rent.
Why the rule is shaped this way is in the DSR rules explained, and where people actually get the arithmetic wrong is in the common DSR mistakes.
What this calculator does not do
- It is not a credit decision. A bank also weighs how it recognises income, your credit standing, the appraised value and the product terms. This models the DSR axis only.
- It ignores the exceptions. Jeonse loans, interim payments, relocation loans and policy microfinance are handled differently.
- It does not tell you the assessed term. We could not read the supervisor’s rulebook, so it is an input.
- It ignores the reduced add-on for fixed-rate periods. Longer fixed periods attract a smaller share of the stress rate; this applies it in full, which is the conservative direction.
Sources
- Korea Ministry of Government Legislation — administrative rule — Regulation on Supervision of Banking Business, article 29-2. Read directly for three things: LTV, DTI and DSR are set in appended table 6; the supervisor may adjust them by up to 10 percentage points; and the method of computation and detailed criteria are for the supervisor to set.
- Financial Services Commission — policy Q&A — FAQ on the 15 October housing market measures. Source for “DSR regulation (40% at banks, 50% at non-banks, the same in regulated areas)”, the 40% LTV in regulated areas, and the caps by house price.
- Financial Services Commission — press release — stage 3 stress DSR confirmed. Source for the 1 July 2025 start, the 1.50% stress rate, the temporary 0.75% for regional mortgages, the rule that credit loans attract it only above a KRW 100m balance, and the bracketed “not charged on the actual loan rate”.
- Financial Services Commission — press release — April 2026 household lending review. Where the definition “DSR = annual principal and interest on all household debt / annual income” was confirmed again in a 2026 document.
Where to check further
- The assessed term for credit and other loans. It sits in the supervisor’s rulebook, which we could not read — your bank or the FSS consumer portal will give you the figure for your own case.
- The stress rate on regional mortgages. The 0.75% treatment was announced through the end of 2025, and we could not confirm what followed — check the FSC press releases for the latest.
- How much of your income counts. Banks differ on what they recognise — asking your own bank what income they will count, and at what figure, comes before any of this.
Written as at August 2026. The ratio caps and stress rates are read from Financial Services Commission documents, and the limit arithmetic is our own, on an equal-total-payment basis. Assessed terms and the exception list are not modelled, because we could not verify them. DSR rules change with each package of measures, so confirm with the bank immediately before you draw down. To see this alongside your other fixed costs, the calculator collection groups the tools by situation. This is general information, not financial advice.
