When a Korean landlord proposes converting jeonse into part-monthly rent, it's hard to judge whether the offer is fair. They'll lower the deposit and add a monthly payment — but by how much should each move?
1. What it gives you. Enter the deposits and the rate and you get the fair monthly rent, plus the statutory ceiling to check it against. One number governs the whole thing: the conversion rate.
2. What decides it. The comparison is conversion rate vs your own jeonse loan rate — rate higher than your loan → borrow and keep jeonse; lower → convert to monthly rent. But borrowing also means carrying the deposit-recovery risk.
3. How to use it. Compare after tax — a non-homeowning employee can claim the monthly rent tax credit, and a jeonse loan may qualify for the principal-and-interest deduction, either of which can flip the answer.
Calculates automatically. Rent = (converted deposit × rate) ÷ 12. The legal cap is the lower of base rate + 2%p and 10% (Housing Lease Protection Act art. 7-2); the base rate changes, so check it at contract time. The loan comparison uses interest only and is indicative.
The formula
Monthly rent = (jeonse deposit − retained deposit) × conversion rate ÷ 12
With the defaults — ₩300M jeonse, keeping ₩100M, converting ₩200M at 4.5% — that's ₩9M a year, or ₩750,000 a month.
To go the other way, converted deposit = rent × 12 ÷ rate. Rent of ₩750,000 at 4.5% equals ₩200M of deposit.
The legal cap — and when it applies
| Legal cap | Lower of base rate + 2%p and 10% |
| As of August 2026 | Base rate 2.75% (raised 16 Jul 2026) + 2% → cap 4.75% (lower than 10%, so this one binds) |
| Applies to | Conversion during a lease and when exercising the renewal right |
| Does not apply | Brand-new contracts — those follow the market |
| If exceeded | The excess is void and recoverable as unjust enrichment |
This trips people up constantly. Renewing your current lease with a conversion is capped; signing for a new place is not. That's why market conversion rates often exceed the legal cap. Note too that a landlord cannot impose conversion unilaterally — the tenant must agree.
Where the cap comes from — two clauses, and that is all
“The lower of base rate plus two points and ten percent” gets quoted everywhere, but rarely with the clause it comes from. Here it is, copied from the statute.
“Where all or part of a deposit is converted into monthly rent, it may not exceed the monthly rent obtained by multiplying the converted amount by the lower of the following ratios:
1. a ratio prescribed by Presidential Decree in consideration of the lending rates applied by banks under the Banking Act and the economic conditions of the region concerned;
2. the ratio obtained by adding a rate prescribed by Presidential Decree to the base rate published by the Bank of Korea.”
— Housing Lease Protection Act, art. 7-2 (translated)
The actual numbers behind those two clauses sit in the Enforcement Decree.
(1) The ratio under art. 7-2 item 1 shall be one tenth per year.
(2) The rate under art. 7-2 item 2 shall be 2 percent per year. <amended 29 Nov 2016; 29 Sep 2020>
— Enforcement Decree of the Housing Lease Protection Act, art. 9 (translated)
| Item | What the Act says | What the Decree fixes | August 2026 |
|---|---|---|---|
| Item 1 | Bank lending rates and regional economic conditions | One tenth per year | 10% |
| Item 2 | Bank of Korea base rate + a decreed rate | 2 percent per year | 2.75% + 2% = 4.75% |
| Applies | The lower of the two | 4.75% | |
Three things stand out.
- The Decree says “one tenth per year,” not “10%.” Same value, older phrasing, still on the books.
- Item 1 says “in consideration of…” and then lands on a flat number. The Act asks for bank lending rates and the economic conditions of the region; the Decree sets one tenth per year, everywhere. Neither factor is visible in the result.
- Only item 2 moves. And for item 2 to exceed item 1, the Bank of Korea base rate would have to pass 8% a year (10 − 2 = 8, our arithmetic). Item 1 reads like a dormant clause.
And one sentence that is not in the statute.
“It applies only on renewal” appears nowhere in art. 7-2. What the clause covers is “where all or part of a deposit is converted into monthly rent” — nothing more.
Reading a brand-new lease as not being a “conversion” is widely accepted, and the table above follows it, but it is an interpretation, not statutory text. We keep the two apart.
The base rate changes. The 2.75% here follows the 16 July 2026 increase, and the calculator's base-rate field is set to the same figure. Enter the rate in force when you sign — the cap moves with it.
Put both clauses on a policy-rate axis and it becomes clear why clause 1 is effectively dormant.
The real test — conversion rate vs your loan rate
- Conversion rate above your loan rate → borrow and keep jeonse
- Conversion rate below your loan rate → take the monthly rent
With the defaults, 4.5% (₩750,000) versus a 4% loan (about ₩667,000) favours borrowing. But at a market rate of 6%, rent becomes ₩1,000,000 and the gap widens sharply.
Numbers aren't everything. A loan means carrying deposit-recovery risk and facing borrowing limits, while renting ties up far less cash and less risk. See negotiating the conversion rate.
Here is what “a conversion rate above your loan rate favours the loan” comes to in money.
Taxes can flip the answer
- Monthly rent — qualifying tenants can claim a rent tax credit, lowering the real cost.
- Jeonse loan — repayments may qualify for a deduction.
Compare after tax, not just interest. See the rent tax credit guide.
Limits of this tool
- The loan comparison counts interest only — no principal, fees or guarantee costs.
- The base rate changes; enter the rate current at your contract date.
- Maintenance and parking costs aren't included.
- Deposit-recovery risk can't be expressed as a number.
What the calculator leaves open
How do I judge the landlord's offer?
Work backwards: find the rate that produces their figure. If it exceeds the legal cap and you're renewing, you can push back.
How do I choose a semi-jeonse split?
Vary the retained deposit and watch the rent move — it's about balancing available cash against monthly capacity. See choosing your split.
How should the contract record it?
Use an amendment stating the new deposit and rent, and obtain a fresh fixed date stamp (see tenant rights).
The conversion rate isn't the landlord's number to set — it's the basis for negotiation. Know the fair figure before the conversation starts.
This is a general-information estimate, not legal or tax advice. Caps and their scope can change and depend on your contract — seek professional advice if a dispute seems likely.
Sources
- Bank of Korea — Base rate history (checked August 2026). The base rate is now confirmed directly from the agency record — 2.75% as of 16 July 2026, up from 2.50% on 29 May 2025. The 4.75% ceiling (2.75% + 2pp) in the body follows from that value. The base rate changes, so check the figure current at the date of your contract — the full record is set out in fixed against variable rates.
- Housing Lease Protection Act — art. 7-2 (restriction on the conversion ratio) (Korean statute portal, checked August 2026). Source for “may not exceed… the lower of the following ratios,” item 1's “lending rates applied by banks… and the economic conditions of the region concerned,” and item 2's “base rate published by the Bank of Korea.” Quotations are our translation.
- Enforcement Decree of the Housing Lease Protection Act — art. 9 (Korean statute portal, checked August 2026). Source for “one tenth per year” and “2 percent per year” <amended 29 Nov 2016; 29 Sep 2020>.
- Our own arithmetic. 2.75% + 2% = 4.75%, and the 8% threshold at which item 2 would overtake item 1 (10 − 2 = 8), along with the worked rent examples, are ours — not figures printed in the sources.
Where to check further
- The basis for “it does not apply to new leases.” Art. 7-2 says only “where… converted.” The reading is common but it is not the text, so if it could be disputed, take it to the Korea Legal Aid Corporation or the housing lease dispute mediation committee, which also runs free legal consultations.
- The base rate on your signing date. The 4.75% here comes from a base rate of 2.75% on 16 July 2026. The rate moves, so check the Bank of Korea’s current figure before you sign.
- What happens to an excess. “The excess is void and recoverable as unjust enrichment” is the usual explanation of “may not exceed,” but no clause states that effect directly, so recovery in practice is a matter for legal advice.
As of August 2026. The cap's basis was read from art. 7-2 of the Housing Lease Protection Act and art. 9 of its Enforcement Decree; the conversions run entirely in your browser. General information, not a ruling on any particular contract.
