Loan prepayment fee (중도상환수수료)
Korean lenders charge a fee for early repayment that shrinks linearly over the fee period — usually zero after three years.
How it works
Fee = amount × rate × (fee period − months elapsed) ÷ fee period. Almost all Korean banks use this sliding formula, and it reaches zero after three years.
Since January 2025 regulators pushed mortgage fee rates down from about 1.2–1.4% to 0.5–0.7%; loans signed earlier keep the rate in their contract.
Assumptions
- Calculated by whole months, not days
- Enter the rate from your contract; fixed vs. variable not distinguished
- Free-repayment allowances (e.g. 10% per year) not modeled
FAQ
Is a partial repayment charged?
Yes, proportionally. Many banks allow up to 10% of the balance per year fee-free — check your contract.
How Korean prepayment fees are set since 2025
From 13 January 2025 lenders may only charge the actual cost of early repayment — funding-cost loss plus administrative cost — instead of the flat 1.2–1.4% that was common before. The result: mortgage fees fell to roughly 0.5–0.7% (fixed-rate loans at the higher end, variable-rate at the lower), and credit-loan fees to 0.1–0.4%. The fee period is still 3 years, and the fee tapers linearly to zero across it.
Formula: fee = amount repaid × fee rate × (remaining fee months ÷ fee period). Repaying KRW 100M at 0.6% after 12 months of a 36-month period: 100M × 0.6% × 24/36 = KRW 400,000.
Examples
| Amount repaid | Fee rate | Months elapsed | Fee |
|---|---|---|---|
| KRW 50,000,000 | 0.6% | 6 | 250,000 |
| KRW 100,000,000 | 0.6% | 12 | 400,000 |
| KRW 100,000,000 | 0.7% | 24 | 233,333 |
| KRW 300,000,000 | 0.5% | 30 | 250,000 |
| KRW 300,000,000 | 0.5% | 36+ | 0 |
When it is worth paying the fee
Compare the fee with the interest you avoid. Refinancing KRW 300M from 4.5% to 3.7% saves about KRW 2.4M a year in interest; a fee of KRW 500k pays back in under three months. Paying down principal early with a bonus saves interest for the remaining term — at 4% every KRW 10M repaid now saves roughly KRW 400k a year — so even a fee of KRW 60k is recovered within two months. The only case where waiting wins is when you are a month or two from the fee period ending.
Free repayment allowances and exceptions
- Most banks allow repaying 10% of the original principal each year without a fee (varies — check the contract).
- No fee after the 3-year period, and none on loans that reach maturity.
- Government-backed mortgages (보금자리론, 디딤돌) have their own tapering schedules, typically 3 years and 0.5–0.7%.
- Refinancing through the online loan-transfer platform (대환대출 인프라) still incurs the fee on the old loan; some banks waive it for internal refinancing.
For foreign borrowers
The same rules apply. If you are leaving Korea and must repay on ARC expiry, the bank cannot charge more than the tapered fee, and many waive it for repayment caused by the end of residency — ask in writing. The prepayment fee is deductible as an expense against rental income if the loan financed a rented property, and counts as an acquisition cost only in rare cases.