President Lee Jae-kwang of Korea Housing Urban Guarantee Corp.(HUG) (Photo: HUG)

The long-term lease called “Jonsei” in Korean refers to a lease with guarantee money with no monthly rental. They can be financed with bank loans at cheaper interest rates than other loans if they are attached to guarantees by one of the three guarantee institutions, including Korea Housing Urban Guarantee Corp.(HUG), Korea Housing Finance Corp. and the Seoul Guarantee Insurance (SGI).

One can get a bank loans without a guarantee attached, but they come with higher interest rates - around 4 percent per year – compared to 3 percent per year for the Jonsei loans with guarantees.

But of late, the conditions for jonsei loans have been toughened, so borrowers have to examine the conditions very clearly to make sure they can qualify for the loans.

From Nov.15, those three financial guarantee firms will no longer issues guarantees to jonsei loan customers who own more than three houses. But one house owners whose combined annual income exceeds 100 million won have been made ineligible for the guarantees.

There are also limits on loan guarantees and jonsei loan guarantees worth 500 million won for loans and 200 million won for jonsei guarantees. HUG will issue guarantees for loans up to 500 million won and jonsei loan guarantees up to 400 million won. HUG’s jonsei loan guarantees will be issued only to those who subscribed for the jonsei loan repayment guarantees.

 SGI doesn’t have any conditions for income to be eligible for its loan guarantees, although it has limits on the guarantee amount. It will issue 500 million won worth of guarantees for jonsei loans. If one wants to take out a jonsei loan for a house worth 1 billion won, he or she can get a jonsei guarantee for 500 million won and get the loan from a bank.

‘HUG Builds World of Abundance, Embracing Housing, Cities, and People’

On July 1, 2015, KHGC was officially reorganized as Korea Housing and Urban Guarantee Co. (HUG).

Designated as the exclusive operator of National Housing and Urban Fund (NHUF), HUG has laid out a vision of becoming the backbone of housing and urban finance by supporting various government policy goals of urban regeneration, better housing conditions for all, etc. in addition to its original function of providing housing guarantees.
 

KHGC, the former institution of HUG, had provided 739 trillion won worth of housing guarantees serving 9.16 million households up until last year since its foundation in 1993.

 As the dedicated public housing guarantor, it paid out 8.5 trillion won in subrogation, protecting the property rights of people.

Recognizing its capability for assessing the feasibility of a project for project financing (PF), KHGC was designated as the exclusive operator of NHUF last year, and was formally reorganized as HUG with the enforcement of NHUF ACT on July 1, 2015.

Its new name, HUG (Korea Housing & Urban Guarantee Corporation) implies that it will embrace housing, cities and people and expresses its determination that it will strive for Humanism, Understanding, and Growth.

HUG is committed to promote urban regeneration by operating NHUF with its accumulated experience and know-how as the public housing guarantor.

It plans to develop a successful financing model for urban regeneration projects and supporting guarantee projects as well as guarantees for small-scale redevelopment project of residential block.