Newlyweds forgo registration to cash in on government payouts

More couples in Korea are using loopholes to apply for loan programs for families with newborns by not registering marriages or both parents' names. They criticize the government for its income-based support measures amid the low birthrate crisis.

An advertisement for a mortgage loan program targeting households with newborns is displayed at Woori Bank in Jung District, central Seoul, on Jan. 29. [YONHAP]

More newlywed couples are opting to not register their marriage to benefit from the low interest rate loans funded by the government.

Other couples are going great lengths to register their child's birth sans one of the parent's names to be eligible for loan programs reserved for households under a certain level of annual income.

A 36-year-old woman who works at a Korean conglomerate recently received a mortgage loan provided to families with newborns after giving birth to a child last year, despite the fact that her and her husband's combined income exceeds the maximum income requirements.

The special loan, first introduced in January, provides low interest rates to couples with newborns when renting or buying a house. It has a minimum 1 percent interest rate range with a lending limit of up to 500 million won ($375,000) for the purchase of a house valued under 900 million won.

But to qualify for the loan, the couple must earn less than 130 million won annually.

The woman was able to receive the benefit by not legally registering their marriage and not registering her husband as a parent on the birth record. In other words, she volunteered to be a single mom, at least on paper, to lower the interest rate.

“I’m going to add my husband’s name as the baby’s father later,” she told the JoongAng Ilbo.

These loopholes are shared widely online, including on portal site Naver’s real estate forums.

These schemes enable couples to bypass the system as it only takes into consideration the total household income.

On Blind, an anonymous online workplace community, many users commented on a post discussing the special loan with some comments saying not following the method is "stupid" and others saying the government should "stop using income as a standard."

Kim, 32, who is expecting a baby in June, is not qualified for the loan because her household income exceeds the threshold.

“The first thing my friends, who work at large corporate companies, asked me was if I registered my marriage,” Kim said. “A number of my acquaintances are planning to get the loan as a single parent. [The policy] makes people who actually registered their marriage seem dumb. I wonder if it’s an appropriate time to discuss one’s income, considering the demographic crisis.”

Korea is experiencing a low birthrate crisis, reaching an all-time low of 0.72 children per woman in 2023. This year, it is expected to plummet to the 0.6 range.

The loan’s interest rate, divided into six levels, is raising questions of its adequacy by some couples.

The current interest rate of the housing loan for newborn families differs according to the applicant's income, ranging from 1.6 percent to 3.3 percent.

The interest rates for this loan range from 1.6 percent to 1.85 percent for households earning less than 20 million won per year; 1.95 percent to 2.15 percent for households earning 20 million won to 40 million won per year; and 3 percent to 3.3. percent for households earning 100 million won to 130 million won per year.

Mortgage loan interest rates for families with newborns[LEE JEONG-MIN]

Some couples complain about the calculation of interest rates.

Lee, 34, had his first child last year and will soon be a father of two.

He bought a house in Bucheon, Gyeonggi, last month, for which he borrowed 450 million won through the loan program targeting families with newborns.

Lee has to now pay 15 million won per year, based on his 3.3 percent interest rate.

The higher interest rate was applied to him because the rate was calculated based on the couple's combined income before his wife’s maternity leave.

In Lee’s case, Lee earns 70 million won a year, while his wife receives 13.2 million won yearly for maternity leave. With this calculation, Lee could have received a 2.7 percent interest rate and would only be charged 12 million won in interest per year.

But as the loan took calculated his wife’s original income of 45 million won, they were pushed to the higher income status with a higher interest rate.

“The special loan given to those who gave birth is actually disadvantageous to those who left for maternity leave,” Lee said. “Our second child is coming not long after the first was born, meaning that we will have a longer maternity leave period. I am already worried about how to pay for the interest and expenses for child-rearing as our family is, in reality, a single-income household.”

“I believed the government when they promoted it as a 1 percent interest rate, but now I wonder how many couples would actually even make it into the 2 percent interest range,” he added.

With income being a key factor in determining who receives the government support, some couples opt to use these loopholes.

According to child care services provided by the Ministry of Gender Equality and Family, support is widely differentiated according to one’s income.

The ministry offers to cover 85 percent of child care expenses for households earning under 75 percent of the monthly median income, and 60 percent for those who earn 75 to 120 percent of the monthly median income.

Those who earn 150 percent more than the monthly median income are unable to receive any government support.

The standard monthly median income this year is 4.71 million won for a household of three.

Local governments also select beneficiaries for child care subsidies based on income.

The Seoul Metropolitan Government offered 300,000 won per month as a child care subsidy, to be given to grandparents who look after their grandchildren who are 24 to 36 months old, since last September.

However, the subsidy was limited to households that earn less than 150 percent of the monthly median income.

People ineligible for the support based on income continue to complain, especially those who just miss the cutoff.

The government said it will consider changing such measures in response the complaints.

The Presidential Committee on Aging Society and Population Policy is discussing how to determine income requirements for government funded loans and whether it is reasonable to exclude high-income households from the benefits.

Such considerations are based on the plummeting birthrate, which has failed to rise despite the government injecting more than 300 trillion won to the cause since 2006.

Report analyses say that due to the increasing number of late marriages and births, the number of double-income households has increased, making the overall income of households with children rise.

“Nothing specific has been decided,” a government official said. “However, we are reviewing various ideas, including the relevance of the income requirements.”

Japan, which has been dealing with its own low birthrate crisis even before Korea, recently decided to abolish its income requirements for support.

The Japanese government introduced a policy exempting tuition fees for higher education for households with three or more children.

It also eliminated the income requirements for the child care subsidy, which is provided until the children graduate from high school.

The Tokyo Metropolitan Government expanded its scope to support high school tuition fees for all households, which previously were limited to households earning less than 9.1 million yen ($61,200).

“It's not the time for the government to limit support based on income in light of the low birthrate, especially when a company is providing 100 million won worth of support to new parents,” Prof. Ahn Chang-nam at Kangnam University said. “It is time to take bold steps, as the nation’s future is counting on solving the low birthrate crisis.”

“But financial support may not be the fundamental solution for the low birthrate. It is a problem that someone can get support when they earn 120 million won, but not when they earn 130 million won.”

BY JEONG JIN-HO, KIM JI-YE [kim.jiye@joongang.co.kr]