An attempt to explain Chonse and Wolse, or Key Money in Korea

It took me ages to understand the Korean "key money" system. I'm well accustomed with various landlord procedures at home. Things like security deposits that are usually the price of the first month's rent, or paying first and last month up front. These things make sense to me. Security deposits cover any costs of repairing damages you caused while living there. First and last month prevents renters from skipping out on tier last month's rent. Key money, though had me baffled. Koreans pay somewhere between 5,000,000 won- 50,000,000 won ($4,000-$42,000 USD) as something that sounds to me the same as a deposit. Then they pay monthly rent. Koreans often take out loans for key money, if they don't have it in the bank. Who in their right mind in the US would take out a loan for an apartment? The whole point of renting is so that one does not need to take out loans!

After many a conversation with my boyfriend about the matter (many of which involved me shouting "but it doesn't make sense! who would seriously pay that much for a deposit?!"), I finally started to understand the system.

Not so many years ago, it was hard to find an apartment with a wolse (key money and monthly rent, but let's use the Korean term for now). Apartments offered a different system, one that is still always possible nowadays, though often not considered. That is something called chonse. Chonse means that you pay a HUGE amount of money (generally 70,000,000 won and up) up front. But, after paying this huge sum of money, you pay no rent. At the end of your rental period, you get all your money back. Actually, it's kind of crazy when you think about it, because you're basically getting an apartment for free. Why does this work? Well, the landlord can do one of two things with your money. He can put it in the bank, and collect the interest on your money. Surely this would be equal to what you would be paying in rent. For example, if you're cholse was 70,000,000 and the landlord put that into the bank at 1% interest, it would be making about 700,000 won a month just in interest alone, and nowadays in Korea you can get those tomato savings with 4% interest. Ok, option two for the landlord, and this is probably more common than the first, knowing your average Korean property owner. Take that chonse and invest it into the next piece of property or investment. When one renter moves out, theoretically a new tenant should move in, paying that same amount, which can just be given to the tenant moving out, and everyone is happy.

Nowadays, it's more common to see a wolse price and a chonse price listed together, and you can take your pick. A wolse price can always be negotiated. For example, if you pay 10,000,000 won as key money, the wolse (monthly rent) might be 700,000 won. But, if you pay 20,000,000 won, maybe your rent might go down to 600,000 per month, and you can negotiate your key money even higher to get even lower monthly rent, if you so choose. Wolse is generally something negotiable. And if you pay a really high key money deposit, you get it back when you move out, not to mention you got cheaper rent while you were there. Of course, you actually need to have this kind of money laying around, which most people don't, if not, you need to take out a bank loan.

Why am I bringing this up now? Well, I'm applying to some jobs for the spring semester, mainly with SMOE, but I'm trying to use what connections I have to find a university job too. If I come back, I'd like to get my own apartment so I don't have to constantly be dealing with school management to get things fixed. I've never had an issue with my school, but I know others who have. Things like this also tend to cause some friction between Korean co-teachers since they are also the ones responsible for dealing with foreign teacher's housing issues. I just want to prevent any problems like that and just get my own place. I've already started looking around, though I know it's way to early to be serious about any particular apartment... but it's fun to dream though!