Pay off a 300 million won floating-rate mortgage taken out on or after 1 January 2026 exactly one year early, and the prepayment fee comes to 1.1 million won. That is KB Kookmin Bank's published 0.55% rate for floating-rate property-secured loans, multiplied by the share of the assessment period still remaining.
The fee is not a single posted rate but a product of three terms. On the same 300 million won, repaying in year one versus year two halves the bill, and after three years it disappears entirely. That is why the first number to check before refinancing is not the rate gap but the number of days remaining.
Three terms multiplied together
KB Kookmin Bank publishes the formula as "principal repaid early x fee rate x (days remaining / loan term)," where days remaining runs from the repayment date to maturity. A 30- or 40-year term does not enter the formula as-is: the same notice specifies that when a loan runs longer than three years, the date three years after drawdown is treated as maturity. The denominator is therefore fixed at 1,095 days, and once three years pass, days remaining hits zero and so does the fee.
Rates split by collateral type and rate structure. For loans newly drawn on or after 1 January 2026, property-secured loans carry 0.55% on floating rates and 0.75% on fixed; unsecured personal loans carry 0.11% and 0.18%. Fixed-rate loans cost more because the bank has locked in long-term funding in advance and absorbs a larger loss when the loan disappears early.
Plugging 300 million won into the formula at different repayment dates, with the assessment period fixed at 1,095 days:
| Repayment timing | Days remaining | Fee at 0.55% floating (KRW) | Fee at 0.75% fixed (KRW) | Share of principal (%) |
|---|---|---|---|---|
| Month 6 | 912 | 1,374,247 | 1,873,973 | 0.46 / 0.62 |
| Year 1 | 730 | 1,100,000 | 1,500,000 | 0.37 / 0.50 |
| Year 2 | 365 | 550,000 | 750,000 | 0.18 / 0.25 |
| Year 2.5 | 182 | 274,247 | 373,973 | 0.09 / 0.12 |
| After year 3 | 0 | 0 | 0 | 0 |
The decline is linear. Because days remaining sits in the numerator, the fee on 300 million won falls by roughly 1,507 won per day — about 90,000 won over two months. There is no cliff edge where waiting a few extra days saves a large sum.
How much the reform actually cut
These rates are the product of a two-stage reform. From 13 January 2025, Korea's Financial Services Commission required prepayment fees on newly drawn loans to stay within actual costs. Its press release limits the calculation to the opportunity cost of disrupted funding plus loan administration and origination expenses, and reports that fixed-rate mortgages at the five largest banks fell from 1.4% to 0.65%, a cut of 0.75 percentage points.
| Applies from | Property loan, floating (%) | Property loan, fixed (%) | Fee on 300mn won at year 1, floating (KRW) |
|---|---|---|---|
| Before reform | 1.20 | 1.40 | 2,400,000 |
| 13 January 2025 onward | 0.65 | 0.65 | 1,300,000 |
| 1 January 2026 onward (KB) | 0.55 | 0.75 | 1,100,000 |
For the same borrower repaying at year one, the cost fell from 2.4 million to 1.1 million won. Note, though, that the 2026 recalculation pushed the floating rate down while raising the fixed rate from 0.65% to 0.75%. The actual-cost principle assumes annual recalculation, and the regulator requires each institution to recompute and publish its rates on the relevant industry association's website every year. Last year's posted rate is no guarantee of this year's.
Coverage widened too. Financial Today reports that the commission approved an amendment to the mutual finance supervisory regulations, extending the same framework to Nonghyup, Suhyup and their peers for loans drawn from 1 January 2026, with Korean Federation of Community Credit Cooperatives set to follow. A rule that began with banks and savings banks reached most of the lending market within two years.
A prepayment fee is not a penalty the bank imposes but a settlement that shrinks in proportion to the time left. The days remaining, not the posted rate, set the number first.
How many months to break even on refinancing
Whether paying the fee is worth it comes down to interest saved. Cutting the rate by one percentage point on a 300 million won balance saves 3 million won a year, or 250,000 won a month; a 1.1 million won fee paid at year one is recovered in 4.4 months. By size of rate cut:
| Rate cut (%p) | Monthly interest saved on 300mn won (KRW) | Months to recover a 1.1mn won fee | Months to recover a 550k won fee (year 2) |
|---|---|---|---|
| 0.2 | 50,000 | 22.0 | 11.0 |
| 0.3 | 75,000 | 14.7 | 7.3 |
| 0.5 | 125,000 | 8.8 | 4.4 |
| 0.8 | 200,000 | 5.5 | 2.8 |
| 1.0 | 250,000 | 4.4 | 2.2 |
These figures assume a constant balance. Under equal principal-and-interest repayment the balance shrinks over time and so do the savings, so real recovery periods run somewhat longer. The direction is clear enough: refinancing at year one for a cut of 0.3 percentage points or less takes more than a year to pay back, and rates may well move again in the meantime.
The new loan's limit deserves a separate check. Refinancing counts as a new drawdown and is assessed under current rules, including the stress rate add-on that varies by region. Borrowers moving off a policy loan should also price in any preferential rate conditions they would be giving up.
What to check
- Drawdown date — loans taken before 13 January 2025 still carry the old rates. Confirm the date and applied rate in the loan agreement or your bank's app.
- Days remaining until the third anniversary of drawdown. On 300 million won the fee falls by about 1,507 won a day.
- Rate type — 0.55% floating versus 0.75% fixed in 2026 means a fixed-rate loan costs 36% more on identical terms.
- Policy loans — Housing and Urban Fund products and Korea Housing Finance Corporation guaranteed loans follow separate rules; bank rate tables do not apply.
- This year's published rate, recalculated annually under the actual-cost principle. What matters is the rate at repayment, not at drawdown.
- Break-even months versus how long you actually plan to stay in the home.