Definition
In Korea, a loan from a bank that covers the stage payments for a pre-sold new apartment, from the day you buy it until it is finished and you move in, about 2 to 3 years later. It usually covers about 60% of the total sale price, and at move-in it is typically swapped for a regular mortgage that you pay off over time.
A new apartment is paid for in three rounds
Think about ordering a custom suit. You pick the fabric and put down a deposit. At the fitting, you pay a middle installment. When you pick up the finished suit, you pay the final balance. Buying a new apartment that isn't built yet works the same way.
In Korea, a new-apartment buyer pays a down payment (usually 10 to 20%) right after winning the subscription lottery. Then, over a construction period of about 2 to 3 years, the buyer pays the interim payments, split up to match construction progress (about 60%), in 4 to 6 installments. Finally, when the building is done and you get the keys, you pay the balance (20 to 30%).
The catch is that the interim payments, well over half the price, add up to hundreds of millions of won. You have to come up with tens of millions of won at a time, every few months. Most ordinary people can't raise that much cash on their own without a bank. But the loan limit varies by region and by how many homes you already own, so you may not be able to borrow the whole interim amount.
It's a group loan, not a personal one
An apartment that is still just a dug-out lot and wet concrete isn't a finished building, so you can't hand it to a bank as collateral. Instead, the developer (or builder) signs an agreement with a bank, backed by a public guarantee agency, and gathers all the buyers so they can borrow together in one go.
This is called a "group loan." You don't have to visit banks one by one and shop for your own loan. On each scheduled date, the bank sends the loan money straight to the sale-payment account the developer designated.
You should also know how the interest works. Some deals have the builder pay the interest for you, called "zero interest." But in many cases, a "deferred interest" plan is used. The interest that builds up during construction is paid all at once when you move in. It isn't free. The interest keeps piling up the whole time, so don't forget it.
A little more precisely
An interim payment loan isn't a long-term loan that you pay off slowly over 10 or 30 years. It's closer to a bridge loan that lasts only until the building is finished.
Once construction ends, the apartment can serve as collateral. At move-in, when the balance is due, you either switch the interim loan into a regular mortgage, or pay it off in full with saved cash or a jeonse deposit (Korea's lump-sum deposit lease). The property registration usually comes after that, and once it does, the bank sets up its claim on the home.
One thing to watch: if loan rules get tighter by move-in time, or the market price falls below the original sale price, your mortgage limit may shrink. If you can't pay the balance, moving in becomes difficult. So build a tight repayment plan from the very beginning.
Common misconceptions
A deferred-interest interim loan is a free loan with no interest during construction.
The interest isn't waived. The builder pays the monthly interest to the bank up front during construction, and when you move in, you repay all the interest that built up in one lump sum.
Where you meet it
In a region with lighter loan rules, you win the lottery for a 500 million won apartment. You pay only the 50 million won down payment in cash and cover the 300 million won of interim payments with a bank interim loan, in installments.
Three years later, the apartment is finished. You convert the 300 million won interim loan into a 30-year mortgage, move in, and start making monthly payments of principal and interest.
In one sentence
It's a group loan that lets you pay large construction-stage costs in pieces until the apartment is finished, then it turns into a regular mortgage when you move in.