DSR is one line of arithmetic — annual principal and interest on all household debt, divided by annual income. And yet five points along that line catch people out again and again. None of them are hard. All five are cases of reading the formula differently from the way it is written.
Each one is shown with figures. Every number below came out of our own DSR calculator, so any of these cases can be re-run there with your own inputs.
1. The biggest gap. Counting interest only. A KRW 30m credit loan at 5.50% over five years costs KRW 1.65m in interest but enters DSR as KRW 6.88m — 4.2 times as much.
2. The second biggest. Ignoring the term. That same KRW 30m consumes 21.7% of DSR over three years and 7.8% over ten.
3. The one that runs backwards. Believing a regulated area tightens DSR — the Commission’s own note says “the same in regulated areas”.
One — count interest only and you have counted a quarter
The name is debt service ratio: principal and interest. The numerator includes repaid principal. Yet the calculation that starts “my interest is X a month” is extremely common.
| The same KRW 30m credit loan (5.50%, 5 years) | Per year | Against income of KRW 50m |
|---|---|---|
| Counting interest only | KRW 1.65m | 3.3% |
| What actually enters DSR | KRW 6.88m | 13.8% |
| Difference | KRW 5.23m | 10.5 points |
Ten and a half points is a quarter of the entire 40% allowance. Counting interest only and concluding “I have room” is precisely what produces the surprise at the branch. How and when principal actually leaves, by repayment method, is laid out instalment by instalment in the loan repayment calculator.
Two — the heavy thing is the term, not the balance
| Term on the credit loan | Annual repayment | Share of DSR | New mortgage available |
|---|---|---|---|
| 1 year | KRW 30.9m | 61.8% | Nil (already over) |
| 3 years | KRW 10.87m | 21.7% | KRW 129.7m |
| 5 years | KRW 6.88m | 13.8% | KRW 186.4m |
| 10 years | KRW 3.91m | 7.8% | KRW 228.6m |
The balance is KRW 30m in every row. Stretching the term from three years to ten adds KRW 98.9m of mortgage capacity. DSR does not ask how much you owe; it asks how much you must repay this year.
Do not read this table as “so stretch the term”. For credit and other loans the bank converts the balance to a set assessed period rather than the contractual term. Article 29-2(3) of the supervisory regulation hands the method of computation to the supervisor, and we could not read that rulebook. That is why the term box in our calculator is editable, with a note telling you to use whatever figure your bank quotes. What this table establishes is only how far one box can move the answer.
Three — the LTV limit is not your limit
“LTV is 40% in a regulated area, so a KRW 1bn house means KRW 400m.” True as far as it goes. The question is whether that KRW 400m gets through DSR.
| Annual income | What DSR 40% allows | LTV 40% of KRW 1bn | The actual limit |
|---|---|---|---|
| KRW 50m | KRW 284.1m | KRW 400m | KRW 284.1m (DSR) |
| KRW 70m | KRW 397.7m | KRW 400m | KRW 397.7m (DSR) |
| KRW 70.4m | KRW 400m | KRW 400m | the crossing point |
| KRW 90m | KRW 511.3m | KRW 400m | KRW 400m (LTV) |
Computed at 4.30% plus a 1.50 point stress rate over 30 years. Below an income of about KRW 70.4m the binding constraint is DSR; above it, LTV. Planning the deposit and balance around LTV alone, on an income below that line, is how a hole opens up at the balance payment.
There is a fourth ruler on top: the cap by house price — in regulated areas, KRW 600m up to a KRW 1.5bn house, KRW 400m from 1.5 to 2.5bn, KRW 200m above that. Your limit is the smallest of LTV, DTI, DSR and that cap. The order in which money leaves, and where it stops being reversible, is in the order to check before buying.
Four — the stress rate is not money
“The stress DSR put rates up 1.5 points” is a common sentence. Rates did not go up. The Commission’s own document settles it in a bracket — “not charged on the actual loan rate”.
| Aspect | What the stress rate does | What it does not do |
|---|---|---|
| Computation | Inflates the rate while DSR is measured | — |
| Result | Shrinks the limit | — |
| Monthly payment | — | Unchanged |
| Total interest | — | Unchanged |
In the earlier case — income KRW 50m, a KRW 30m credit loan over five years — 1.50 points removed KRW 34.6m. With the add-on at zero the same inputs allow KRW 221.0m; at 1.50% they allow KRW 186.4m. The interest paid is identical in both. What changed is only how much you may borrow.
Two refinements worth knowing: credit loans attract the add-on only above a KRW 100m balance, and a longer fixed-rate period attracts a smaller share of it. Why those branches exist is set out against the rule text in the DSR rules explained.
Five — a regulated area does not tighten DSR
Designating an area tightens several things at once, so it is natural to assume DSR drops below 40% as well. The Commission’s own note says the opposite.
FSC, FAQ on the 15 October housing market measures — “Financial-sector lending is subject to DSR regulation (40% at banks, 50% at non-banks, the same in regulated areas)”.
What actually tightens is LTV (70% to 40%), DTI, and the cap by house price. The same document keeps first-time buyers at 70% LTV even in a regulated area and lower-income owner-occupiers at 60% — working out which category you fall into is the faster move.
The rule runs the other way too: DSR does not loosen outside regulated areas. Moving the search to a different district buys headroom on LTV, not on DSR.
The five, in one table
| The common belief | What is actually true | In figures |
|---|---|---|
| Interest is what counts | Principal counts too | KRW 1.65m → 6.88m |
| A small balance is fine | A short term is heavy | 3 yrs 21.7% vs 10 yrs 7.8% |
| The LTV limit is my limit | The smallest of four | They cross at KRW 70.4m income |
| You pay the stress rate | It only cuts the limit | Same interest, −KRW 34.6m |
| Regulated areas tighten DSR | DSR is unchanged | Banks 40% · non-banks 50% |
If the plan is to repay something early to free up DSR, an early repayment fee comes with it — the early repayment fee calculator gives the figure. Jeonse loans are treated differently in the DSR computation and sit outside all of this; what banks charge on them is measured in the jeonse loan rate article.
None of the five come from not knowing the rule. They come from reading the formula differently: principal is in the numerator, the numerator is set by the term rather than the balance, and DSR is only one of several rulers.
Sources
- Financial Services Commission — press release — April 2026 household lending review. Carries, in footnotes, both the definition “DSR = annual principal and interest on all household debt / annual income” and the definition of the stress DSR. Confirmed in a 2026 document.
- Financial Services Commission — policy Q&A — FAQ on the 15 October housing market measures. Source for “40% at banks, 50% at non-banks, the same in regulated areas”, the 40% LTV in regulated areas, the price-band caps, and the 70% and 60% categories.
- Financial Services Commission — press release — stage 3 stress DSR confirmed. Source for the 1.50% add-on, the rule that credit loans attract it only above a KRW 100m balance, the reduced share for longer fixed-rate periods, and “not charged on the actual loan rate”.
- Korea Ministry of Government Legislation — administrative rule — Regulation on Supervision of Banking Business, article 29-2. Paragraph 3, delegating the method of computation and the detailed criteria to the supervisor, is the basis for “the bank converts the term”.
Where to check further
- The assessed term for credit and other loans. It sits in the supervisor’s rulebook, which we could not read — asking your own bank what term it converts your loan to is the accurate route.
- How much of your income is recognised. Documented, imputed or declared income — and at what figure — changes the denominator. Ask your bank first.
- Which loans are excluded or treated differently. The list is in the rulebook — the Financial Supervisory Service and your bank can say where your own borrowing falls.
Written as at August 2026. The ratio caps and stress rates were read directly from Financial Services Commission documents, and every figure in the tables is our own calculation on an equal-total-payment basis. Assessed terms and the exception list sit in the supervisor’s rulebook, which we could not read, so the terms used here are assumptions. A real limit also turns on how the bank recognises income and on the product terms — confirm at the branch immediately before you draw down. This is general information, not financial advice.
