SORA RENTAL NOTE · 24
How is extra rent calculated when I reduce my deposit?
Understand Korea’s cap on converting an existing rental deposit into monthly rent, with an illustrative calculation and a checklist for the agreement.
Content checked · 3 October 2026
The key points
- Check the statutory rate when converting part or all of an existing deposit into rent.
- The annual ceiling is the lower of 10% or the Bank of Korea base rate plus 2 percentage points.
- Multiply the converted amount by the annual rate, then divide by 12.
01 — 04
Start with the comic
If I reduce my deposit, how much extra rent can be charged?
For an existing deposit conversion, first check the annual rate cap.
Converted deposit × annual rate ÷ 12?
Yes. Also agree on the refund date and when the new rent starts.
Identify what is being changed
- Deposit to be returned
- Remaining deposit
- Monthly rent
This guide concerns returning part or all of an existing deposit in exchange for monthly rent. Housing Lease Protection Act Article 7-2 limits the rate used for that conversion. The cap does not require either party to accept a requested contract change.
Agreeing an initial deposit and rent with a new tenant is different. You cannot judge every advertised price by this formula alone. Conversely, simply signing a new document with the same tenant does not automatically make an existing conversion a genuinely new tenancy.
Use an annual rate, then divide by 12
- Deposit to be returned
- Annual rate
- Monthly calculation
Enforcement Decree Article 9 sets the annual ceiling at the lower of 10% and the Bank of Korea base rate plus 2 percentage points. Extra monthly rent equals the converted deposit multiplied by the applicable annual rate, divided by 12. Use only the portion converted.
For illustration, assume a 4% annual ceiling. Converting KRW 12 million gives KRW 12,000,000 × 0.04 ÷ 12 = KRW 40,000 per month. The 4% is hypothetical, not today’s rate. Check the applicable base rate and law when making the conversion.
Record amounts and payment dates together
- Remaining deposit
- Monthly rent
- Payment due date
Separate existing rent from the amount added by conversion. Record the refund, remaining deposit, new rent, refund date and rent start date. Check whether the proposal increases rent before the deposit is actually returned.
Article 10-2 allows a claim for rent paid above the statutory conversion limit. Applicability and the excess amount still need checking. Keep the original lease, amendment, payment records and calculation. Any separate changes to other conditions require their own assessment.
What to check
- Identify whether this is an existing-deposit conversion.
- Check the converted amount and applicable statutory rate.
- Divide the annual calculation by 12.
- Agree in writing on amounts, the refund date and rent start date.
Common questions
Must my landlord accept a smaller deposit?
No. The ceiling regulates an agreed conversion; it does not unilaterally change the contract.
Does the same rule apply when I increase the deposit to reduce rent?
Article 7-2 addresses deposit-to-rent conversion. Do not automatically apply the same statutory cap in reverse; assess the agreement separately.
Official sources
These laws and public-agency materials concern renting in Korea. Source documents are mainly in Korean.