Jeonse and wolse in one minute
Korea has a rental system found almost nowhere else. With jeonse (전세) you hand the landlord a large lump-sum deposit — often more than half the property's value — and pay no monthly rent. The full deposit comes back when you move out. With wolse (월세) you pay a smaller deposit plus monthly rent. Many leases sit in between: a large deposit with a small rent, often called banjeonse (반전세).
Moving between them uses a conversion rate: how much yearly rent a given amount of deposit is worth.
How the conversion works
Monthly rent = (current deposit − deposit you keep) × conversion rate ÷ 12
At 5%, converting ₩100 million of deposit gives ₩100 million × 5% ÷ 12, about ₩416,667 a month. The higher the rate, the worse it is for the tenant, because each won of deposit you take back costs more in rent. That is why the law caps it.
The legal cap
Under Article 7-2 of the Housing Lease Protection Act, the conversion rate may not exceed the lower of:
- the Bank of Korea base rate + 2%
- 10% a year
With the base rate at 3.00%, the cap is 5.0%. It moves whenever the Bank of Korea changes the base rate.
An important limit: the cap is binding only when deposit is converted to rent during an existing lease. When a lease ends and you sign a new one, it doesn't apply, which is why rates of 6–7% are common in the market.
Which is cheaper: jeonse or wolse?
Compare the conversion rate with the interest rate on a jeonse loan (or what your money would otherwise earn):
- Conversion rate higher than the loan rate — jeonse is cheaper. Borrowing to keep the deposit costs less interest than paying rent.
- Conversion rate lower than the loan rate — wolse is cheaper.
For example, at a 5.5% conversion rate and a 3.5% loan, converting ₩300 million means ₩1,375,000 a month in rent, against ₩875,000 in loan interest: ₩6 million a year in favour of jeonse. Money isn't everything, though: a bigger deposit is a bigger amount at risk if the landlord can't pay it back.
Rent to deposit
The same formula works in reverse. Replacing ₩1,000,000 of monthly rent at 5% needs ₩1,000,000 × 12 ÷ 5% = ₩240 million of extra deposit. Here a lower rate is worse for the tenant, because you need more deposit to remove the same rent.
Protecting your deposit as a foreign tenant
A jeonse deposit can be most of your savings. Korean law protects it, but only if you take a few steps — and foreign residents can take all of them:
- Register your address. For foreign residents, reporting your new address to immigration (체류지 변경신고 — at an immigration office, a community service center or on HiKorea) counts as the move-in report that gives a tenant legal protection. Do it on the day you move in.
- Get a fixed-date stamp (확정일자) on your lease at a community service center or registry office. With the address report, it gives you priority over later creditors if the home is sold at auction.
- Check the property register (등기부등본) before signing, available from the Internet Registry Office. Existing mortgages rank ahead of you; as a rule of thumb, mortgages plus your deposit should stay below about 80% of the home's market value.
- Consider deposit-return guarantee insurance from HUG, HF or SGI, which pays your deposit if the landlord doesn't. Ask whether your visa and lease qualify.
What this calculator doesn't include
- Rent increases on renewal (capped separately at 5% when a tenant uses the right to renew)
- Maintenance fees (관리비), utilities and loan costs
- Tax on rental income for landlords, and rent tax credits for tenants