What are some payment methods in our world?
In Korea, there is a unique housing payment called “Jeonse”. Also called ‘key money deposit’, it is one of the most typical forms of rent payment in Korea. The payment system is preferred in the Korean real estate market because it could benefit both owners and renters.
However, foreigners may have different views on this ‘strange’ way of a housing payment. There are two most famous paying systems in the world. One of the most famous systems can be buying a house for sale at one time.
So after paying the certain amount of money that the seller wants, you can own that house continuously. The other ways can be monthly rent or pay. Monthly rent or pay has little difference; the buyer can just pay monthly.
Countries such as South Korea or some states in the United States of America, the buyer needs to pay a sizable amount of money to the owner first. After paying the deposit, they will eventually pay a small amount of money every month.
So What is Jeonse? How is it different from other options?
It is one of the most famous house paying methods in Korea right after buying a house at one time. Jeonse started right after the Korean war, initially only allowed in limited cities. However, it got more popular among Koreans, and now it is used in all states and cities in Korea.
So how is it different to one time paying trade or method? Jeonse is very different in that you pay a certain amount of money of the actual house value to the owner. Once the renter pays the money to the owner, then he or she basically has a right to live in the house.
Jeonse is also different from monthly rent in that you only have to pay once. With monthly payment, you have to pay a deposit at contract and then pay a certain amount of money every month.
Why do people prefer Jeonse over other options?
From an owner's perspective, Jeonse is more comfortable and profitable. There might be a risk that the renter might not pay the money correctly in monthly rent.
Then the owner needs to sue the renter or force him or her out. This process normally takes at least 6 months, making the owner more annoyed and losing another chance to rent the house to other people.
Also, Jeonse is helpful to the owner's financial pressure. When the renter wants to leave the house, the owner has to pay back the deposit he or she got. However, the owner doesn’t have enough money to pay back most of the time. Nevertheless, the owner can get the amount from a new renter.
What do people from other countries think about jeonse?
As I mentioned earlier, Jeonse only exists in South Korea, which is unique. For Koreans, Jeonse is a typical type of house trading. To learn foreigner’s think about Jeonse, I interviewed two people.
The first question I asked was if you were the buyer or the renter, would you trade with monthly pay or jeonse. Patrick Bonner, an Asia Area Channel marking leader at 3M, said “If I had enough money to pay Jeonse, I would prefer to rent a house with monthly pay rather than paying a large amount of money for a rent. I would rather save up more money to “buy” the house or would like to invest or use that money to earn more money.”
My second question was that if you were the seller (or landowner) would you put the house on the market as a monthly rent or jeonse rent. However, he said, “If I’m the owner, I will put the house as a Jeonse rental on the market. It would be a good choice to get a large deposit from the renter. I would like to get more bank interest with that money which will have additional profit than the monthly rent.”
The last question I asked was do you think it will be good or functioning well if the jeonse system is implemented in other countries. Mr. Bonner said, “Jeonse system would not work well in Australia, where I grew up, because most of the high schoolers would like to be independent immediately after high school graduation and they would have small amount of money to rent as a jeonse and would rent as a monthly rent.”
He continued that it might be different by country and culture because some countries are independent right after graduation. He said if young foreigners rent in Jeonse, their credit rank might decrease, which is crucial in their lives in foreign countries, including South Korea.
The second interview was with Hong-Il Cha, Brand Relations & Events Manager at LEGO Group. Much information was gained through his experience living in multiple countries such as Korea, Germany and Switzerland with the interview.
The first question was from a foreigner's perspective how it would be for foreigners to buy a jeonse or think about jeonse. Him having experience in many foreign countries such as Germany and Switzerland said, “I think that Jeonse might be in a dangerous way because if the renter was scammed, they would lose a large amount of money that might affect their entire life.”
He added, “Foreigners would not like the risk they might have. The Korean government and the estate agent seem to not care deeply about the foreigner Jeonse renters.”
Both of the interviewees said that for forgein countries, many people would still prefer the monthly payment because of the culture, the considerable risk, and further possibilities. However, both mentioned that it would be more profitable for the seller.
Justin Yonghoo Cho
Justin Yongho Cho email@example.com
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