Jeonse Conversion Rate: How It Works and Current Cap

One of the most practically important numbers in the Korean rental market is the 전월세 전환율 — the rate used to convert between jeonse (lump-sum deposit) and wolse (monthly rent). If you are negotiating a rental contract, calculating your actual housing cost, or deciding whether to switch from jeonse to wolse mid-lease, you need to understand exactly how this rate is set and what it means for your wallet.

What the Conversion Rate Actually Is

The conversion rate is an annualized percentage that defines the relationship between a deposit reduction and the corresponding monthly rent increase. In plain terms: if you reduce your deposit by 10 million KRW, how much monthly rent should you pay in exchange?

The rate is not negotiated freely between landlord and tenant — it is capped by law. Under the Housing Lease Protection Act (주택임대차보호법), the maximum allowable conversion rate is:

전환율 상한 = 한국은행 기준금리 + 3.5%

Jeonse Conversion Formula

Jeonse Conversion Kr

How the Bank of Korea Base Rate Affects You

As of 2025, the Bank of Korea (한국은행) base rate stands at 3.0%, making the legal maximum conversion rate 6.5% (3.0% + 3.5%). When the BOK raises rates, this cap rises, meaning landlords can legally charge more monthly rent for the same deposit reduction. When rates fall, tenants have a stronger legal argument to reduce monthly payments when renewing contracts.

This linkage matters most during lease renewals under the 계약갱신청구권 (contract renewal right), which gives tenants the right to renew for an additional two years with a rent increase capped at 5%. If a landlord wants to convert from jeonse to wolse or increase the monthly amount beyond 5%, the conversion rate cap controls the maximum increase.

The Conversion Formula in Practice

The monthly rent from a deposit gap is calculated as:

Monthly rent = (Jeonse deposit − Wolse deposit) × Conversion rate ÷ 12

Example 1: A property has a full jeonse of 500 million KRW. The landlord offers a wolse alternative with a 50 million KRW deposit. At the 6.5% cap:

Monthly rent = (500M − 50M) × 0.065 ÷ 12 = 450M × 0.065 ÷ 12 = 2,437,500 KRW/month

This is the maximum legal monthly rent. If the landlord demands more, the tenant can legally refuse.

Example 2: A tenant currently on jeonse at 400 million KRW wants to switch to wolse with a 20 million KRW deposit at renewal. The monthly equivalent at the cap:

Monthly rent = (400M − 20M) × 0.065 ÷ 12 = 2,058,333 KRW/month

Reverse Calculation: What Jeonse Equivalent Does Your Wolse Represent?

If you are paying wolse and want to understand the full economic cost in jeonse terms — useful for comparing properties — reverse the formula:

Jeonse equivalent = Wolse deposit + (Monthly rent × 12 ÷ Conversion rate)

Example: You pay a 30 million KRW deposit + 1.5 million KRW/month. The jeonse equivalent at 6.5%:

= 30M + (1.5M × 12 ÷ 0.065) = 30M + 276.9M = approximately 307 million KRW

This means if you can find a comparable property with a full jeonse deposit under 307 million KRW, the jeonse deal is economically better (assuming you have the capital).

When the Legal Cap Does Not Apply

The 6.5% cap applies specifically to residential properties covered by the Housing Lease Protection Act — standard apartments and houses used as primary residences. The cap does not apply to:

• Commercial properties (상가 임대차)
• Studio officetel units classified as non-residential
• Properties where the entire agreement is freely negotiated outside the standard residential framework

In practice, most officetel rentals used as residences are still covered if the tenant can demonstrate primary-residence use, but this can require a dispute process if the landlord disagrees.

Using the Rate to Evaluate a Deal

When evaluating a wolse offer, always check whether the implied conversion rate offered by the landlord is below, at, or above the legal cap:

1. Calculate the implied rate: (Monthly rent × 12) ÷ (Jeonse deposit − Wolse deposit)
2. Compare to the current cap (Bank of Korea rate + 3.5%)
3. If the implied rate exceeds the cap, the landlord is offering an illegal rate — you can renegotiate or report the excess

A rate significantly below the cap may indicate a generous landlord, a property with low demand, or a landlord who needs a large deposit for liquidity reasons.