General Information

Pension fund members are entitled to a loan from the fund if they satisfy several requirements.

Terms and Conditions for Mortgage

The borrower can choose between four types of mortgages: two types of indexed mortgages and two types of a non-indexed mortgage.

Indexed mortgages have either a fixed interest rate for the entire term of the loan, or a fixed interest rate for 60 months (5 years). After each 60-month period, the interest rate is reviewed and may be altered to conform with the interest rate level current at that time.

The fixed interest rate for the entire mortgage term is 3,45%. Borrowers can choose to have a mortgage with equal instalments repaid on the principal (annuity mortgage) or with equal total payments (amortized mortgage).
The 60-month fixed interest rate is 3,38%. Borrowers can choose to have a mortgage with equal instalments repaid on the principal (annuity mortgage) or with equal total payments (amortised mortgage).
The interest rate on non-indexed mortgages is currently 9,03%. Interest rates on non-indexed mortgages are fixed for 36 months at a time. Both mortgages with equal payments (amortised mortgages) and mortgages with equal instalments on the principal are available.
The interest rate on non-indexed mortgages with variable interest is currently 7,91%. Interest rates on non-indexed mortgages can variable several times a year. Both mortgages with equal payments (amortised mortgages) and mortgages with equal instalments on the principal are available.

Am I entitled to a loan?

You are entitled to a loan if you have paid pension contributions in 6 of the past 12 months prior to your application, or for a total of 36 months prior to your application.

The minimum loan amount is ISK 1,000,000. The maximum amount of a fund member's loan to an individual, couple or co-habiting partner is ISK 75,000,000.

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 interest rates fixed for 60 months an equal payments (amortised loans)
Inflation-indexed mortgages with interest rates fixed for 60 months 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
Non-indexed mortgages with variable interest rates and equal payments (amortised loans)
Non-indexed mortgages with variable interest rates and equal instalments

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

What happens to the interest rate on a non-indexed loan once 60 months have passed?

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 7.420
Credit assessment for married/co-habiting couples	ISK 14.310
Drafting of mortgage documents (except in the case of a single mortgage document)	ISK 8.000
Handling registration/sending cost	ISK 1.500
Registration	ISK 2.500
Statement of liens	ISK 1.200

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.