Jeonse-to-Monthly Rent Conversion: From the Legal Cap to Deposit Protection
Whether an existing jeonse deposit is converted into monthly rent, or monthly rent is converted back into a deposit for comparison, the key question is how much deposit corresponds to how much rent. That ratio is the conversion rate (전월세전환율). The statutory cap under Korea's Housing Lease Protection Act governs an actual conversion of all or part of an existing deposit into monthly rent. It does not set the legal price for this calculator's reverse estimate or automatically determine a new lease's market terms; applicability to a particular agreement requires a review of the transaction and housing.
How the 2026 legal conversion cap is set
Under Article 7-2 of the Housing Lease Protection Act and its Enforcement Decree, when converting all or part of a deposit into monthly rent, the rate cannot exceed the lower of (1) the Bank of Korea base rate + 2 percentage points or (2) 10% per year. On August 27, 2026 the Monetary Policy Board raised the base rate to 3.00% (a second consecutive hike after July), so the legal cap is 3.00% + 2.0%p = 5.00% per year (5.00% < 10%, so 5.00% applies). Because the cap moves with the base rate, always check the current base rate on the Bank of Korea site at contract time.
| Base rate (example) | Legal cap (= base rate + 2%p) | Note |
|---|---|---|
| 1.50% | 3.5% | Pandemic-era low-rate phase |
| 3.00% | 5.00% | Current, August 2026 (raised Aug 27) |
| 3.50% | 5.5% | 2023–2024 high-rate phase |
| 8.0%+ | 10% | Hard ceiling (10%) applies |
Jeonse → monthly rent: formula and worked example
Multiply the deposit being converted by the conversion rate to get one year of rent, then divide by 12. The formula is monthly rent = (converted deposit × conversion rate) ÷ 12.
Example: Assume a KRW 100 million jeonse is changed to a KRW 30 million deposit plus rent and that the 5.00% statutory cap in force from August 27, 2026 applies to this conversion. The converted portion is 100M − 30M = KRW 70 million; the annual amount is 70M × 5.00% = KRW 3.5M; and the monthly equivalent is 3.5M ÷ 12 = about KRW 291,667. This illustrates the cap formula only. Confirm legal applicability, whole-won contract terms, and any separate rent-increase restriction for the actual agreement.
- Monthly → jeonse is the reverse: deposit added = (monthly rent × 12) ÷ conversion rate. For 300,000 won/month: (300,000 × 12) ÷ 5.00% = 72 million won added to the deposit.
- A lower rate reduces rent for the same converted deposit: with every other term fixed, a lower rate produces less monthly rent in the formula. Overall advantage can still change with deposit-financing cost and return risk.
- Market rate ≠ legal cap: negotiated terms for a new lease vary by location, property, and date. First distinguish a deposit-to-rent conversion covered by the statutory cap from a market comparison or reverse estimate.
Deposit vs. rent trade-off: how to decide
The conversion rate is only a starting point when comparing deposit and rent. Compare the after-tax cost of borrowing the deposit—or the risk-adjusted, after-tax return you could earn on released cash—with the rent increase over the same period. Deposit-return risk and guarantee cost, liquidity, moving timing, actual eligibility and limits for the rent tax credit, and the possibility of investment losses can reverse the result. The conversion rate alone does not prove that either option is a gain or a loss.
Protecting your deposit: avoiding an underwater jeonse
A larger jeonse share cuts your monthly outlay but raises the risk of non-return of the deposit (깡통전세, an underwater lease). If the deposit is too large relative to the property's value, you may not recover it in a foreclosure. Check the following.
- Debt ratio and valuation basis: review (senior claims + deposit) ÷ housing value, but valuation and guarantee-screening rules differ by provider, housing type, and date. Do not use one 70–80% figure as a universal safe line.
- Property register (등기부등본): verify mortgages and senior tenants both before signing and before the final payment.
- Opposability and priority requirements: before signing and paying the balance, check the required timing for possession, resident registration, and a fixed date. Same-day registered rights and existing senior claims can affect priority.
- Deposit-return guarantees: HUG, HF, SGI, and other products differ in eligible housing, valuation, limits, coverage ratio, application deadline, price, exclusions, review, and claim requirements. Do not assume approval or full reimbursement; check the current product terms.
- Recommended tools: run the example above with the Rent Conversion Calculator.
- Compare your investment return against the conversion rate using the Interest Calculator.
- Plan deposit financing or loan repayment with the Loan Repayment Calculator.