A land-secured loan is more than appraised value times LTV
A useful land-loan estimate has to connect four layers: the land value used for planning, the portion a lender recognizes as collateral, the applicable loan-to-value ratio, and any priority claims that consume the collateral limit before the new loan. This calculator links those layers to a monthly repayment schedule, total interest, and land-value stress cases of 10%, 20%, and 30% declines.
The 70% and 40% figures on this page are not universal rules for every Korean land loan. They model the current supervisory caps for a bank household-purpose loan secured by non-housing property, including land. A lender still performs its own valuation, title review, repayment-capacity assessment, fund-purpose review, and credit approval. The output is a planning estimate, not lender approval or a promise of funding.
2026 legal baseline and exact scope
The official sources were rechecked through the Korean National Law Information Center on August 7, 2026. The Banking Supervision Regulation currently used here is Financial Services Commission Notice No. 2026-10, issued March 18, 2026 and effective April 1, 2026. Its administrative-rule ID is 21829 and its serial number is 2100000276094.
Official 2026 rules and the way this land-secured loan calculator uses them| Topic | Official provision | Calculator treatment |
|---|
| Bank household non-housing collateral | Annex 6, Chapter 2, Item 2-3(a) | General cap of 70% |
| Land transaction permit zone | Annex 6, Chapter 2, Item 2-3(b) | Cap of 40% |
| Bank household DSR screen | Annex 6, Chapter 4, Item 4 | Separate 40% check above KRW 100 million |
| Maximum rate for financial institutions | Lending Business Act Article 15 and Enforcement Decree Article 9 | 20% annual input ceiling |
The agricultural-operator exception is a scenario, not an eligibility decision
Annex 6 contains a limited path for an agricultural, livestock, or fishery operator who owned the relevant land before the permit-zone designation, subject to verification by the bank. Selecting the exception models the general 70% cap only on the assumption that the lender has confirmed every condition. The calculator cannot verify occupation, ownership timing, purpose, documentary evidence, or lender interpretation.
From reference value to new-loan capacity
Land is often less standardized and less liquid than an apartment. Road access, parcel shape, zoning, use restrictions, development prospects, recent comparable transactions, and expected disposal time can all influence a lender's recognized collateral value. Keeping the reference value and recognition rate separate makes that uncertainty visible instead of hiding it inside one optimistic number.
1. Recognized collateral value
Recognized value equals reference land value multiplied by the collateral recognition rate. A KRW 500 million reference with an 80% recognition rate produces KRW 400 million of recognized collateral value.
2. Gross LTV limit
Gross LTV limit equals recognized collateral value multiplied by the applied LTV. For a bank household case, the requested ratio is reduced when it exceeds the relevant 70% or 40% supervisory cap.
3. Capacity after priority claims
New-loan capacity equals the gross LTV limit minus priority claims and lender deductions. Existing secured debt, maximum secured claim amounts, lease deposits, and other senior exposures should be entered using the lender's actual deduction method.
4. Principal used for interest
The modeled principal is the lower of the requested loan and available capacity. If the request exceeds capacity, the shortfall is shown explicitly and interest is calculated only on the amount that fits inside the modeled collateral limit.
Why the business and corporate mode does not force a 70% cap
The relevant Annex 6 definition and cap concern bank household-purpose loans secured by non-housing property. Treating every business-purpose or corporate land loan as subject to one universal statutory LTV would overstate what the rule says. In the business, corporate, or other mode, the calculator therefore uses the ratio supplied by the user as a planning assumption and tells the user to confirm lender-specific valuation and underwriting policy.
How to use the calculator
- Choose the loan context first. Use the bank household option only when the planned borrowing fits that regulatory context. Use the business, corporate, or other option when a lender-specific ratio is the appropriate planning input.
- Confirm permit-zone status outside the calculator. This page does not perform an address lookup. Check the current local-government notice or an official land-use document for the parcel and calculation date.
- Separate price from recognized value. A purchase price, publicly assessed land value, seller's asking price, appraised value, and lender valuation may differ. If the lender has already provided a recognized value, enter that amount as the reference and set recognition to 100%.
- Enter priority claims conservatively. Ask whether the lender deducts the outstanding balance, the registered maximum secured claim, lease deposits, or another exposure measure. Use the same convention in the input.
- Match the repayment offer. Level payment and equal principal support a grace period followed by amortization. The interest-only choice pays periodic interest and the entire principal at final maturity.
- Read the stress table before the headline limit. A plan with little capacity after a 10% decline may require more equity even if it passes the base case today.
Worked example: requesting KRW 200 million against land valued at KRW 500 million
Start with a general-area bank household non-housing loan. Enter a KRW 500 million reference land value, an 80% collateral recognition rate, a requested LTV of 70%, KRW 50 million of priority claims, and a KRW 200 million loan request. Use a 5.5% annual rate, a 120-month term, 12 months of interest-only grace, and level payments for the remaining 108 months.
Worked land-secured loan example showing capacity and total interest| Step | Method | Result |
|---|
| Recognized value | KRW 500 million x 80% | KRW 400,000,000 |
| Gross LTV limit | KRW 400 million x 70% | KRW 280,000,000 |
| Available new capacity | KRW 280 million minus KRW 50 million | KRW 230,000,000 |
| Modeled principal | Lower of request and available capacity | KRW 200,000,000 |
| Monthly payment during grace | Interest for months 1 through 12 | KRW 916,667 |
| Payment after grace | Level payment over 108 months | KRW 2,351,999 |
| Total interest | Sum of monthly interest on opening balances | KRW 65,015,937 |
| Total repayment | KRW 200 million principal plus interest | KRW 265,015,937 |
The new loan alone is 40% of the KRW 500 million reference value, but the combined exposure of KRW 250 million is 62.5% of the KRW 400 million recognized collateral value. The exact inverse calculation shows that the requested loan plus priority claim needs a minimum reference value of KRW 446,428,573 under these recognition and LTV assumptions. The implementation accounts for whole-won flooring at both value stages so the minimum does not fall one won short at a boundary.
Repayment methods and total-interest behavior
Level payment
After grace, principal and interest are combined into a nearly constant monthly amount. Cash flow is predictable, although interest makes up a larger share of the early payments.
Equal principal
The principal is divided evenly after grace and interest is charged on the remaining balance. Initial payments are higher, but principal declines faster and total interest is usually lower.
Interest only with balloon
Periodic payments cover interest and the entire principal is due in the final month. The balance does not decline, so total interest and maturity liquidity risk can be materially higher.
What is included in total interest?
The schedule divides the entered nominal annual rate by twelve and applies it to each month's opening principal balance. It excludes stamp tax, mortgage registration costs, appraisal fees, guarantee fees, prepayment charges, default interest, day-count differences, and future rate changes. Korean law may treat certain deductions or charges as interest for the effective-rate test while excluding defined collateral, credit-inquiry, or prepayment costs. A displayed nominal rate therefore does not settle legal compliance by itself.
Reading the land-value stress table
Each stress row reduces only the reference land value while holding the recognition rate, LTV, and priority claims constant. Real lenders may also tighten recognition or underwriting in a weak market, so these rows isolate price sensitivity rather than forecast every adverse change.
Worked example capacity under land-value decline scenarios| Value decline | Stressed reference value | Available capacity | Surplus or shortfall vs request |
|---|
| 0% | KRW 500,000,000 | KRW 230,000,000 | +KRW 30,000,000 |
| 10% | KRW 450,000,000 | KRW 202,000,000 | +KRW 2,000,000 |
| 20% | KRW 400,000,000 | KRW 174,000,000 | -KRW 26,000,000 |
| 30% | KRW 350,000,000 | KRW 146,000,000 | -KRW 54,000,000 |
The example still supports the KRW 200 million request after a 10% decline, but by only KRW 2 million. A 20% decline produces a KRW 26 million shortfall, and a 30% decline produces a KRW 54 million shortfall. A borrower planning near the base-case ceiling should consider equity reserves, a higher-rate scenario, a lower recognized-value scenario, and the possibility that senior claims grow before closing.
Practical use cases
Equity planning before buying farmland or woodland
Model a conservative lender value instead of treating the purchase price as guaranteed collateral value. Add the displayed funding shortfall to acquisition tax, brokerage, legal, appraisal, and development-preparation costs to estimate the cash needed at closing.
Additional borrowing behind an existing mortgage
Enter the lender-confirmed senior deduction, which may differ from the outstanding principal shown on a statement. When priority claims exceed the gross LTV limit, the calculator floors modeled new capacity at zero instead of presenting a negative amount as available credit.
Preparing for the end of a grace period
Compare the first payment, the payment immediately after grace, the maximum monthly payment, and first-year debt service. A low initial interest-only payment can conceal a sharp increase when amortization begins.
Comparing lender proposals on consistent assumptions
Run each proposed valuation, recognition rate, approved LTV, nominal rate, term, and repayment method separately. A lender offering more capacity does not necessarily offer the lower total cost, especially after fees, mortgage setup expenses, and prepayment terms are considered.
Boundaries the result cannot decide
- A regulatory maximum is not an approved ratio. A bank may apply a lower ratio or decline the application after considering liquidity, title, borrower credit, repayment ability, or fund purpose.
- DSR cannot be calculated from priority claims alone. Annex 6 calls for a separate 40% bank household DSR test when total loans, including the application, exceed KRW 100 million. Accurate DSR needs annual income and the debt-service amounts and classifications of all relevant debts. The on-screen warning is only a review prompt.
- Land transaction permission and credit approval are separate. A permit may be required for the transaction, but receiving it does not compel a lender to finance the purchase.
- A variable rate changes the schedule. The calculator holds the entered rate constant for the entire term. Run additional cases one and two percentage points higher when evaluating floating-rate risk.
- Actual statements may round differently. The engine retains precision through the schedule and rounds displayed won amounts, while a lender may use day counts, payment dates, and final-installment conventions that create small differences.
Frequently asked questions
Can I enter the publicly assessed land value?
It can serve as an early planning reference, but it is not guaranteed to equal a bank appraisal or recognized collateral value. Recalculate with a lender-confirmed value when available, or use several lower value and recognition combinations to create a range.
Is land-loan LTV always 70% in Korea?
No. The 70% figure used here is the general supervisory ceiling for the specified bank household non-housing collateral context. A land transaction permit zone generally invokes 40% for that context, and business-purpose, corporate, policy, legacy, or lender-specific structures may require a different analysis.
Should priority claims equal the old loan balance?
Not necessarily. A lender may deduct the outstanding balance, registered maximum secured amount, lease deposits, or other priority exposures. Review the title and tenancy position and ask the prospective lender which figure it will use.
Does the KRW 100 million warning mean automatic rejection?
No. It is a prompt to check the separate 40% DSR framework for a bank household loan when total loans including the application may exceed KRW 100 million. It is not a DSR calculation or rejection decision because this tool does not collect all debt and annual-income data.
Does entering 20% guarantee that the contract is lawful?
No. The statutory ceiling for the covered financial-institution context is 20% annually, but fees or deductions can affect the effective legal rate and defined costs may be excluded. Review the complete contract and cost statement with the lender or qualified adviser.
Does a longer grace period only reduce monthly burden?
It reduces the initial payment but delays principal reduction, usually increasing total interest and compressing amortization into fewer months. Compare the payment during grace, payment after grace, and lifetime interest together.
Documents and checks to prepare
- Review the land register for ownership, mortgages, superficies, provisional seizures, and other rights.
- Confirm zoning, permitted use, development restrictions, and current permit-zone status through official land-use material and local notices.
- Record whether each scenario uses purchase price, public value, appraisal, or lender-recognized value so unlike figures are not mixed.
- Collect lender proposals on the same date and compare recognized value, approved LTV, senior-claim deduction, rate type, term, and repayment method.
- For a floating-rate loan, rerun the schedule at one and two percentage points above the offered rate.
- For a balloon loan, test whether the final principal can be funded without assuming a sale, extension, or refinance will be available.
Official sources and verification date
The links below point to official National Law Information Center XML records used for the implementation. Rules can change, so recheck the version effective on the application date and obtain the lender's current written terms.
- Banking Supervision Regulation, current official record
Financial Services Commission Notice No. 2026-10, administrative-rule ID 21829, serial number 2100000276094, effective April 1, 2026. The implementation reviewed Articles 27, 29-2, and 78 and Annex 6, including Chapter 2 Item 2-3 and Chapter 4 Item 4. - Act on Registration of Credit Business and Protection of Finance Users, Article 15
Law ID 009348, master serial 277259, current version effective January 2, 2026. - Enforcement Decree of the Lending Business Act, Article 9
Law ID 009365, Presidential Decree No. 36313, master serial 285821, current version effective May 6, 2026. This record supports the 20% ceiling and the treatment of specified costs.
Source verification date: August 7, 2026. This page is an informational planning tool. It does not provide an appraisal, credit decision, investment recommendation, or Korean legal or tax advice.
Recheck capacity and lifetime interest with the same assumptions
Enter the appraisal, recognition rate, priority deduction, and rate supplied by the lender. Save the base result beside the 20% and 30% land-value decline cases so your financing discussion includes both current capacity and downside resilience.