General Information

Pension fund members are entitled to a loan from the fund if they satisfy several requirements. Click here for a variety of useful information on taking out a loan.

Conditions for mortgage loans

The borrower can choose between a loan with fixed interest rate or a loan with variable interest rate.

  • Fixed interest rate is 3,60% and the borrower can choose between a loan with fixed amortizations or fixed payments (annuity).
  • Variable interest rate is now 2,74% (December) and is 0.75% higher than the last months average yield for the most recent category of 30-year Housing Financing Fund bonds (HFF150434) in the transaction system of the Iceland Stock Exchange.
  • The interest rate on non-indexed mortgages is currently 6,09%. Interest rates on non-indexed mortgages are fixed for 36 months at a time and are based on the market yields on non-indexed Treasury notes (RIKB31). Both loans with equal payments (amortised loans) and loans with equal instalments on the principal are available.

Am I entitled to a loan?

You have the right to take out a loan if you have personal pension savings or pension entitlement in the fund which you have acquired by making minimum contributions or supplementary contributions to the fund, and satisfy other requirements of the rules on loans.

The minimum loan granted is ISK 1.000.000. The maximum amount of a members' loan to an individual, married couple or co-habiting couple is ISK 50.000.000.

What security do I have to provide for the loan?

Loans are only granted against a mortgage on residential property owned by the borrower in Iceland.

The outstanding balance on any existing mortgages, plus the pension fund loan applied for, may not exceed 70% of the value of the collateral as specified in this section when the loan is granted. If the mortgage for a new loan or transfer of collateral for a loan from the fund exceeds 65% of the value of the collateral, the requirement is generally set that any third-party mortgages (other than those of LV) may not amount to more than 20% of the assessed value of the collateral.

The mortgage percentage shall be calculated based on the selling price in the purchase contract when a loan is granted in connection with purchase of real estate. In other cases the existing official assessed value shall serve as the basis.

For what purpose can I use the loan?

No conditions are set as to what the loan can be used for, except in the case of conditional authorisation for a mortgage.

Can I pay off the loan, or make payments toward the principal?

Yes. Loans can be paid off at any time without any prepayment charge. Please include the number of the loan in the explanation/reference of payment.

Payments can be deposited in account 0515-26-010200, Reg. No. 430269-4459.

Does my spouse have to be co-borrower?

Yes, in those cases where he/she owns a share together with the borrower in the property to be mortgaged or the entire property. Your spouse must also be co-borrower if he/she is included in the credit assessment with you.

Can I take out a loan on a property which is partly owned by someone else?

If a person other than a spouse, i.e. who is married to or in a registered partnership with the borrower, is the borrower's co-owner of the property a mortgage cannot be granted for that property.

What type of loans are offered?

  • Inflation-indexed mortgages with fixed interest rates and equal payments (amortised loans)
  • Inflation-indexed mortgages with fixed interest rates and equal instalments
  • Inflation-indexed mortgages with floating interest rates and equal instalments
  • Non-indexed mortgages with interest rates fixed for 36 months and equal payments (amortised loans)
  • Non-indexed mortgages with interest rates fixed for 36 months and equal instalments

Fixed-rate mortgages: Loans are available with fixed interest rates  and either equal payments (amortised loans) or equal instalments.

Floating-rate mortgages: Floating interest rates are only available if loans have equal instalments.

What's the difference between equal instalments and equal (amortised) payments?

Equal payments: If a loan is amortised, the payments you make will be equal throughout the repayment period, but will change in line with changes to the Consumer Price Index (CPI).  On the other hand, the relative amount of the instalment on the principal and the interest paid will change.  The principal decreases more slowly than if equal instalments are paid.

Equal instalments:  For loans with equal instalments, the amount paid towards the principal in each payment is the same. The debt service is therefore greatest at the beginning, but decreases as the loan term progresses.

What happens to the interest rate on a non-indexed loan once 36 months have passed?

A notice is sent to the borrower at least 30 days before a change is made to the interest rate, as provided for in Art. 35 of Act No. 118/2016, on Consumer Mortgages.  If you take no action, the new interest rate currently offered on such loans will be fixed once more for the next three years. Information on current interest terms is available on the pension fund's website. Otherwise, you have the option of converting to another type of loan at this point in time without paying a borrowing charge.

How long is the maturity of the loan, and how many instalments are there?

Loans can have a maturity of from 5 to 40 years.

Twelve instalments are paid each year.

What fees do I have to pay when taking out a loan?

Cost of borrowing

Borrowing charge

ISK 55.000

Transfer of mortgage

ISK 4.000

Lien authorisation

ISK 4.000

Conditional lien authorisation

ISK  4.000
Partial mortgage release 
ISK 4.000

Amendments to loan terms 

ISK 4.000
Change of debtor
ISK 8.000
Debt restructuring
ISK 8.000

Payment fee

ISK 140/240

Credit assessment for individuals 

ISK 5.000

Credit assessment for married/co-habiting couples 

ISK 7.500

Drafting of mortgage documents (except in the case of a single mortgage document)

ISK 8.000

Handling registration/sending cost

ISK 1.500

Payment for drafting of documents and charges for sending and registration must be paid before the documents are registered at the fund's offices on the 3rd floor; payment can also be made directly to the fund's account:

  • Bank account no:  515-26-401144
  • Reg. No: 430269-4459.
  • Furthermore, the borrower must pay the registration fee at the District Commissioner's office. Fees are as provided for in the District Commissioner's current tariff. 

Possible consequences if obligations under a loan contract are not met

If a debtor cannot pay the loan instalments, interest or indexation on the due date, the entire loan falls due without prior notice. The debtor will have to pay penalty interest from the due date, with the rate determined by the Central Bank of Iceland, as provided for in the first paragraph of Art. 6 of Act No. 38/2001, if he/she fails to make payment on time, in addition to all the costs resulting from the default.

The final result could be that your home would have to be sold at forced auction if you fail to make your payments.