2025 Year-End Settlement: Mortgage Loan Deduction Guide (Requirements & Documents Checklist!)

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As the 2025 year-end settlement season approaches, one of the most searched topics among employees is ‘mortgage loan (ML) deduction’.
If you have a mortgage loan, you may be eligible for tax credits or income deductions for the interest you pay annually. However, ML deductions can vary depending on loan date, home acquisition date, loan type, home price, and repayment method, which often causes confusion.

This guide explains the 2025 mortgage loan deduction system in an easy-to-understand way and provides a complete checklist for claiming the deduction.

🏠 What is a Mortgage Loan Deduction?

Mortgage loan deduction allows taxpayers to claim deductions for interest paid on qualifying mortgage loans.
It is designed to reduce housing costs and support housing stability. Eligible employees can apply if certain conditions are met.

Key factors affecting eligibility:

1. Loan type

   • Standard mortgage
   • Government-backed loans (e.g., “Bogeumjari” loan)
   • Eligible long-term housing loans

2. Home acquisition date and appraised value

   • Determines eligibility
   • Influences maximum deduction limits

3. Repayment method

   • Principal & interest installment (equal payments)
   • Principal-only installment
   • Interest-only installment

These factors directly impact the deduction amount, so it’s essential to know your loan type.

📌 1. Eligibility Criteria for Mortgage Loan Deduction

✔ Income Requirement

• Must be a wage earner
• Some deductions may be adjusted if overlapping with other housing-related deductions

✔ Home Requirement

• Must be a residential property in South Korea
• Lower home value generally increases deduction limits
• Specific criteria differ depending on acquisition date

✔ Loan Requirement

• Loan must be for home acquisition
• Loan must be in the borrower’s name
• Must be a legitimate loan from a financial institution

📌 2. Deduction Type: Income Deduction vs Tax Credit

Mortgage loan deductions are generally divided into two types:

🟦 (1) Income Deduction

Reduces your annual taxable income by the amount of interest paid.
Deduction rates depend on loan conditions and can be more complex than tax credits.

🟩 (2) Tax Credit

Directly reduces the tax payable by a percentage of the interest paid.
Most new home purchases under long-term housing loans qualify for this.

Note

• Often, only one deduction type can be claimed
• Loan date (e.g., before 2014, after 2015) affects eligibility
• Check which category your loan falls under

📌 3. 2025 Maximum Deduction Limits for Mortgage Loans

Note: Actual deduction may vary based on income, loan amount, and repayment method.

📌 4. Documents Needed for Year-End Settlement

Most information is automatically collected via the Hometax Year-End Simplification Service, but some documents may need manual submission.

Required Documents

• Loan repayment certificate (usually auto-collected)
• Loan contract
• Property registration document
• Appraised value documentation

Auto-collected Checklist

• Financial institution interest payment certificate
• Loan product information
• Repayment history

📌 5. How to Apply for Mortgage Loan Deduction

1. Access Hometax Year-End Simplification Service
2. Collect data under the “Housing Loan” section
3. Automatically generate PDF for company submission
4. Submit to employer for final reporting to the National Tax Service

Carefully check that no information is missing, as mortgage deductions often involve multiple items.

📌 6. Common Mistakes with Mortgage Loan Deductions

❗ 1) Loan in spouse’s name

• Only the loan holder can claim the deduction

❗ 2) Misunderstanding home value limits

• Exceeding the appraised value may reduce deduction

❗ 3) Claiming deduction for interest-only loans

• Maximum benefits are usually for fixed-rate + principal & interest installment loans

📌 7. Deduction Calculation Examples

Example 1: 15+ years, Fixed-rate & Principal & Interest Installment

• Loan amount: 300,000,000 KRW
• Annual interest paid: 1,500,000 KRW
• Maximum deduction: 2,000,000 KRW

Calculation

• Actual interest (1,500,000 KRW) < max limit (2,000,000 KRW)
• Deductible amount = 1,500,000 KRW

Example 2: 10+ years, Fixed-rate or Principal & Interest Installment

• Loan amount: 200,000,000 KRW
• Annual interest paid: 800,000 KRW
• Maximum deduction: 600,000 KRW

Calculation

• Actual interest (800,000 KRW) > max limit (600,000 KRW)
• Deductible amount = 600,000 KRW

📌 8. Tips to Maximize Deduction

• Switching to fixed-rate + principal & interest repayment may increase benefits
• Check deduction eligibility after marriage, moving, or household changes
• Additional home purchases may nullify previous deductions

FAQ

Q1. Can I deduct the full interest paid?

No, deductions are limited by loan type and applicable maximum limit.

Q2. Can I claim if the loan is in my name but the home is jointly owned?

Yes, deductions apply based on the loan holder.

Q3. What if the home’s appraised value exceeds 500 million KRW?

It depends on the loan type; exceeding the limit does not always mean ineligibility.

Q4. Can I claim deductions for interest-only loans?

Some loans qualify, but principal & interest installment loans generally provide larger benefits.

Q5. How are refinanced mortgage loans treated?

They are generally eligible if loan purpose and type are maintained.

Related Resources & References

• Hometax Year-End Simplification Service: https://www.hometax.go.kr
• NTS Year-End Tax Guide: https://www.nts.go.kr/nts/cm/cntnts/cntntsView.do?mi=2304&cntntsId=238938
• Financial Supervisory Service Loan Comparison: https://m.easylaw.go.kr/MOB/OnhunqnaInfoRetrieve.laf?onhunqnaAstSeq=92&onhunqueSeq=6088