Fixed versus variable mortgage rates: calculating repayments on 300 million South Korean won over 30 years
Directly compare monthly payments and total interest at annual rates of 4%, 4.5% and 5% for 300 million South Korean won repaid over 30 years in equal principal-and-interest payments. Distinguish rate-reset timing, outstanding principal, early-repayment costs and South Korea's stress DSR.
In a hypothetical comparison of a South Korean won 300 million mortgage repaid through equal monthly principal-and-interest payments over 30 years, keeping annual rates at 4.0% and 4.5% throughout produces a total-interest difference of approximately 31,611,616 South Korean won. This does not predict future variable rates.
Does “fixed rate” mean the same rate for all 30 years?
A rate fixed until maturity differs from a hybrid loan fixed only for the first few years. A hybrid may switch to a variable rate after the agreed fixed period. Some products reset rates at regular intervals. Look beyond the product name: check the fixed period, next rate-change date, benchmark, spread and preferential-rate conditions.
A variable rate does not necessarily move immediately or by the same amount when the Bank of Korea changes its base rate. It adjusts according to the benchmark and reset interval in the contract. Nor is a fixed rate always more expensive initially. Start with actual offers obtained on the same day.
What does a 0.5-percentage-point difference cost?
Assume principal of 300,000,000 South Korean won, 360 months and equal monthly payments combining principal and interest. There is no grace period, fee or early repayment, and each rate stays unchanged to maturity. These are calculation assumptions, not currently offered rates.
| Annual rate | Monthly payment, rounded to South Korean won | Total interest, rounded to South Korean won |
|---|---|---|
| 4.0% | 1,432,246 | 215,608,519 |
| 4.5% | 1,520,056 | 247,220,135 |
| 5.0% | 1,610,465 | 279,767,353 |
With principal P, monthly rate r and n payments, the monthly payment is P × r ÷ (1 − (1+r) raised to −n). Divide the annual rate by 12 for the monthly rate. Enter annual 4% as 0.04. At a zero rate, divide principal by the number of months.
The monthly difference between 4.0% and 4.5%, calculated before rounding, is about 87,810 South Korean won. The total-interest difference is 31,611,616 South Korean won. Total interest uses unrounded monthly payments, so it may differ slightly from multiplying the displayed payment by 360. Actual bank schedules also differ because of payment dates, day-count conventions and whole-won handling.
The same 1-percentage-point increase has different effects depending on timing
Five repayment schedules were calculated for 300 million South Korean won over 360 months, with equal principal-and-interest payments at month-end. All start at 4%. Any changed rate is assumed to remain until maturity. These are not sales rates or forecasts.
| Assumption | Total interest over 360 months (South Korean won) | Highest monthly payment (South Korean won) |
|---|---|---|
| Remains at 4% | 215,608,519 | 1,432,246 |
| 5% from month 13 | 276,003,730 | 1,605,795 |
| 5% from month 61 | 261,807,192 | 1,586,241 |
| 5% from month 301 | 217,730,284 | 1,467,609 |
| 3% from month 61 | 171,955,860 | 1,432,246 |
Although both increases reach 5%, an increase from month 13 produces approximately 276 million South Korean won in total interest, versus about 217.73 million from month 301. Both the time at the higher rate and the outstanding principal differ. In the scenario falling to 3%, the maximum payment is the amount before the cut.
The monthly sequence is current interest = previous balance × annual rate ÷ 12, principal repaid = monthly payment − current interest, then new balance = previous balance − principal repaid. In the reset month, the payment is recalculated from the outstanding principal and remaining months. Earlier repaid months are not recalculated at the new rate.
Calculations continue with unrounded decimals; only table values are rounded to whole South Korean won. Bank day counts, truncation, preferential conditions and early-repayment fees are separate. If you intend to sell in 5 years, compare interest paid up to then and the balance at sale, rather than the 360-month total. Refinancing an existing loan needs a separate comparison with the remaining terms matched.
Verification record: on September 15, 2026, 1,800 monthly rows covering 5 scenarios were prepared and checked against total principal, monthly balances, the 0% boundary case and an independent balance formula. These are not actual customer repayments.
Recalculate the loan from the remaining principal
Use remaining principal, months left, rate and discount conditions, and prepayment or refinancing fees. Compare balance, interest and fees over the same holding period, then rerun a sale after five years. Keep DSR stress separate from actual cost; if a bank leaves a field or condition unanswered, do not declare a winner.
💡 Practical insight: calculate what you can withstand before predicting rates
In the hypothetical table, the monthly payment difference between annual 4.0% and 5.0% is approximately 178,219 South Korean won. This compares two different new loans; it does not directly predict a reset on an existing mortgage. First check whether cash remaining after living costs, other debt payments and emergency savings is less than this. With little headroom, the lowest starting rate is not enough to guide the decision.
Check the conditions for retaining preferential rates in new offers. Existing-loan balances, fees and cost recovery are covered separately in calculating refinancing for an existing mortgage.
South Korea's stress DSR is an affordability assessment that accounts for the risk of rising rates. The rate added for assessment is not automatically added to the interest you actually pay. The Financial Services Commission guidance confirms that the implementation on July 1, 2025 was phase 3, not phase 2. Its detailed implementation release explains assessment structures by product type. Rules may subsequently change, so obtain the bank's loan-limit calculation on the application date.
Frequently asked questions
Q. Does 5-year fixed mean 30-year fixed?
No. Check the contract for the rate method after 5 years, benchmark and first reset date.
Q. Do all variable rates change every 6 months?
It depends on the contract. Ask the bank about your product's reset interval and the date when its benchmark is observed.
Q. Does the lowest starting rate give the lowest total cost?
No. Later rates, fees, preferential conditions and how long you actually keep the loan change total cost.
Q. Can I use a deposit-interest calculator for loan payments?
No. Deposits accumulate money; loan principal declines. Use the formula here or a bank repayment schedule.
Q. Do I actually pay the stress DSR rate?
The rate used to assess borrowing limits differs from contracted interest. Check the applicable rate in your loan contract.
Q. Can these tables identify a fixed-versus-variable winner?
No. The first payment table assumes each rate remains constant for 360 months. The second assumes changes in specified months. Neither predicts the future. An actual variable-rate calculation must follow the individual's contractual reset dates and subsequent rate path.
Existing regulatory guidance checked: 2026-09-08. Rate-path calculations verified: 2026-09-15. This is calculation guidance, not a personal loan recommendation or approval guarantee. Confirm payment dates, whole-won handling, fees and eligibility in your own offer.
