When it comes to renting an apartment in Korea, particularly in Seoul, you might have heard about the possibility of securing a lower rent by offering a higher deposit. But do you know how much rent discount you can get when you put a higher deposit, and why landlords are willing to accept a lower rent instead? Because the high deposit system is a unique feature in Korea, you may find it difficult to understand the deposit system in here in Korea. In this guide, Hometown Realty will shed light on the Korean housing deposit system and help you understand how it works.
A Sense of Security
Landlords in Korea may be more inclined to offer a lower rent to tenants who provide a higher security deposit. This is because a higher deposit offers landlords greater security, as it covers potential damage or unpaid rent. In exchange, tenants can enjoy a lower monthly rent payment.
Financial Benefits for Landlords
The deposit amount and rent price can also be influenced by the bank interest rate. When the bank interest rate is high, landlords may offer lower rent in exchange for a higher deposit because they can earn more interest on the deposit money. On the other hand, when the bank interest rate is low, landlords may prefer to offer higher rent and lower deposit amounts. In some cases, landlords may be required to place tenant deposits in a separate account that earns interest, and the amount of interest earned may be shared between the landlord and tenant according to local regulations.
Example of the Value of a Deposit Amount
To illustrate, assuming an interest rate of 5% and a deposit of 10 million KRW (approximately 8,500 USD) in South Korea, the annual interest earned on the deposit would be 500,000 KRW (approximately 425 USD). Some landlords may offer a rent discount of 1-2% of the deposit amount, which would translate to a discount of 100,000 to 200,000 KRW (approximately 85-170 USD) per year.
Benefits of a Higher Deposit for Tenants
From a tenant’s perspective, paying a higher security deposit can lead to long-term savings on monthly rent payments, as long as the deposit amount is reasonable and complies with local rental laws. However, it is important to thoroughly inspect the rental unit before moving in and document any existing damage to avoid potential disputes with the landlord when it comes time to move out.
Why Hire a Real Estate Agency ?
In general, renting through a Korean real estate agency can provide some level of protection for your deposit. Real estate agencies are regulated and have specific guidelines they must follow, which can help ensure that your deposit is handled properly. Additionally, reputable agencies often have established relationships with landlords and can act as intermediaries in resolving any issues that may arise during your tenancy.
To sum up, Landlords are more likely to offer lower rent in exchange for a higher deposit, as it provides them with a greater sense of security and can result in financial benefits from the bank interest rate. Tenants can benefit from long-term savings on monthly rent payments, but it is important to ensure that the security deposit amount is reasonable and in compliance with local rental laws, and to thoroughly inspect the rental unit before moving in. Renting through a real estate agency can also provide protection for the deposit, as agencies are regulated and can act as intermediaries in resolving issues with the landlord.
