When you see a notice that mortgage rates are lower than the interest you are currently paying, it is natural to want to switch banks. Given the size of the loan, even a small rate difference can be an opportunity to ease the burden on household finances. However, deciding to refinance based only on the rate displayed on the screen may not deliver the expected savings.

When checking "mortgage refinancing conditions," two questions should be considered separately: whether you can take out a new loan, and whether moving is actually advantageous. Eligibility and economic benefit are separate matters. A refinance loan is a method in which a borrower takes out a new loan from a different financial institution to repay an existing one. Financial authorities have established an online refinancing infrastructure allowing consumers to look up their existing loans and compare conditions at other financial institutions. However, viewing a product on the comparison screen does not guarantee loan approval. The process requires the financial institution's review and contract signing, as well as repayment of the existing loan.

Refinance Loan Eligibility: Six Months After Disbursement; Delinquent or Legally Disputed Loans Excluded

The first items to check are the type and disbursement date of the existing loan. When introducing online mortgage refinancing for apartments, the Financial Services Commission stipulated that borrowers must wait six months after the existing loan is disbursed, and that delinquent loans or those in legal dispute are excluded. When actually applying, borrowers should verify the latest eligibility requirements of the relevant financial institution and platform. The terms of the online service should not be assumed to apply equally to refinancing at all branch offices.

It is also important not to think of refinancing as a means of raising additional funds. Online mortgage refinancing is structured to move within the balance of the existing loan. KakaoBank likewise states that borrowers cannot apply to refinance an amount exceeding the balance of a mortgage held at another bank. Those seeking to borrow additional funds for living expenses or other purposes must check whether a separate loan is available.

Collateral Housing Review, LTV, and DSR Regulations Also Need Checking

It is also necessary to check whether the collateral housing is covered by the product in question. Review results may vary depending on the type of housing, whether market value can be verified, income, debt, and credit status. The application of related regulations, such as the loan-to-value ratio (LTV) and the total debt service ratio (DSR), should also be verified. In particular, do not assume that the review conditions for moving to another financial institution are the same as those for maintaining the existing loan; it is advisable to confirm the regulations and any exceptions applicable at the time of application.

Calculating Refinancing Costs: Early Repayment Fees, Stamp Duty, and Registration Expenses

If refinancing is possible, the next step is calculating the costs. Borrowers should check the early repayment fee incurred when paying off the existing loan ahead of schedule, as well as the stamp duty on the new loan and their share of registration-related costs. Even when a financial institution covers some of the costs, the scope and conditions of such support should be examined.

The reform of the early repayment fee system does not mean that fees under existing contracts have all disappeared. Financial authorities have announced that from 2026, the reform will be extended to mutual financial institutions so that only the actual costs of disbursing loans are reflected. The actual amount owed must be confirmed based on the terms of one's own contract.

Recovery Period Example: 300 Million Won Balance with a 0.5 Percentage Point Rate Drop

For example, assuming a loan balance of 300 million won and an annual rate 0.5 percentage points lower, the simple annual interest difference—assuming the balance does not shrink—is 1.5 million won. If the cost of switching is 1 million won, it takes about eight months to recover it. However, actual savings vary with principal repayment and rate changes, so this should be viewed as an example illustrating a comparison method.

A Lower Monthly Payment Does Not Mean Lower Total Costs

A reduction in the monthly payment alone should not be taken as a reduction in total costs. If the repayment period is extended, the monthly payment may decrease while the period of paying interest lengthens. Total interest should be compared by considering the rates, repayment methods, and remaining terms of both the existing and new loans together.

Preferential Rate Conditions and Rate Types Should Also Be Reviewed

Preferential rate conditions also need to be checked. Borrowers should examine whether the rate applies only when conditions such as salary transfers or credit card usage are met, and whether the rate changes after a certain period. The difference between variable-rate products and those that fix the rate for a certain period should also be reviewed alongside the initial rate.

Checklist Before Refinancing

If preparing to refinance a mortgage, start by organizing the existing loan balance, applicable rate, remaining maturity, and early repayment fee. Then compare these with the final conditions offered by the new financial institution. Whether a "lower rate" actually translates into household savings can only be judged after reviewing the outcome of the credit assessment and the costs of switching.

[This article was partially prepared with the assistance of AI.]