When the jeonse loan rate rises from 4% to 6%, jeonse and monthly rent swap places
Jeonse is a Korean lease where you put down a large deposit instead of paying monthly rent. It is easy to assume jeonse wins because there is no rent. But it ties up a big deposit and usually means loan interest, so depending on rates it can cost more than renting.
The basic comparison
Three costs matter: interest on the part of the deposit you borrowed, the interest your own money would have earned elsewhere, such as in a savings account (opportunity cost), and the monthly rent under a rent contract.
Jeonse cost is loan interest plus opportunity cost on the jeonse deposit. Rent cost is loan interest plus opportunity cost on the rent deposit, plus total rent paid. Compare the totals over the contract period.
An example where the rate flips the answer
Assume a jeonse deposit of 300,000,000 (200,000,000 borrowed, 100,000,000 your own) against a rent deposit of 30,000,000 with 900,000 a month. The term is two years and savings earn 3% a year.
| Jeonse loan rate | Jeonse, 2 years | Rent, 2 years | Cheaper |
|---|---|---|---|
| 4% | 22,000,000 | 23,400,000 | Jeonse (by 1,400,000) |
| 6% | 30,000,000 | 23,400,000 | Rent (by 6,600,000) |
Going from 4% to 6% adds 8,000,000 in interest. The rent side does not change, so the ranking flips. In short, the break-even between jeonse and rent is set by the loan rate and the rent level. The higher the rate, the more attractive renting becomes.
What these numbers assume
Every figure above is an illustrative input. Real loan rates, savings returns, and rents vary by time, region, and your own terms. The calculator does not pull live rates or policy data. It computes only from what you enter, so before a real contract use the rate you can actually get and the local market.
Some factors are not modeled: deposit-return risk, the landlord, moving costs, and tax treatment. The tool compares only what can be counted. Commute time between home and work is also worth weighing, as covered in A two-hour daily commute costs you about 1.7 years.
Frequently asked questions
Is one of them always cheaper?
No. The ranking depends on the loan rate, the deposit size, and the rent level.
Why include opportunity cost?
Because money tied up in a deposit cannot earn anything elsewhere. Leaving it out makes jeonse look cheaper than it is.
Does a four-year term change the result?
Costs scale with the term, so the ranking stays the same if rates and rent stay the same. If they change during the term, the result changes too.
To compare with your own numbers, use the Jeonse vs. rent calculator.