What Is an 'Up-Contract'? — How Inflating Home Prices to Get More Loans Becomes a Crime

The real price is 500 million won, but the contract says 600 million. That's an 'up-contract.' It's a way to inflate the price on paper to borrow more — and 1,005 cases were caught over 5.5 years.

Why does a higher contract price mean more loan money? Because of LTV — Loan to Value. If LTV is 70%, you can borrow up to 70% of the home's value. For a 500M won home, that's 350M. Write 600M on the contract, and the limit jumps to 420M.

So why is this a problem? The bank is lending more than the actual asset is worth. If prices drop, the collateral value falls below the loan amount. That gap becomes a loss shared across the bank and the broader financial system.

The buyer is also at risk. Since you reported a higher price, acquisition tax and capital gains tax are calculated on that inflated number. When you sell later, the tax bill could be much larger — and if you're caught, criminal charges follow.

Overseas real estate funds have had similar transparency problems — risks on junior tranches weren't properly disclosed, leading to investor losses. Now disclosure is mandatory. The lesson is the same: read the contract carefully. Every line.