Chief Advantages
Gildi’s loan rules are flexible and offer various options for fund members. You can choose between indexed loans with fixed or variable interest rates or non-indexed loans with variable interest rates. The loan is for up to 40 years.
The loans are divided into two parts if the mortgage loan ratio exceeds the fund’s set criteria. Basic loans of up to 60% of the property’s value, and additional loans from 60 to 70% of the property’s value are granted.
Advantages
- Choose between indexed and unindexed loans.
- Up to 70% mortgage ratio based on the value of the property.
- There is no early payment fee on housing loans, which can be paid up at any time.
Housing loans:
- Gildi only grants housing loans against a mortgage on a residential property intended as the applicant’s legal residence.
- Loans are only granted for a property that is fully owned by the applicant (a single person) or is jointly owned by the applicant and their spouse (a married couple or registered cohabitation).
- If there are two applicants, they must be married or registered into cohabitation to be able to apply for a joint loan from Gildi. Both people must be legal owners of the property and have to go through the payment assessment together.
- It is not permitted to apply for a loan with a parent or a sibling.
- If the property is in full ownership of an individual, then the credit assessment will only consider his/her income, assets, and debt.
- A purchase offer that both the buyer and seller have signed must accompany the application for a loan to buy a property.
- Gildi does not grant loans for buying summer houses.
The borrower decides
- Length of loan period from 5 years to 40 years.
- Indexed or unindexed interest.
- Fixed or variable interest.
- Equal instalments or equal payments.
Credit Analysis
- Gildi performs a payment ability assessment and assesses the creditworthiness of applicants.
- An exception may be made to the payment assessment when refinancing a loan from Gildi when the loan amount is equal to the amount it takes to pay off the older loan plus the borrowing cost, and the change does not increase monthly payments.
- The payment ability assessment is based on income from the last 12 months, according to your tax register.
- Rental income is not taken into account for the payment assessment.
- Loans are not given to individuals who are currently on Creditinfo’s defaulters list.
- A spouse may not be included in the payment ability assessment unless they are a legal co-owner of the property.
Good to know
Yes, it is possible to make additional payments towards a loan.
If the person in question has an account with Íslandsbanki, a one-time extra payment can be made through online banking on the Íslandsbanki app. Otherwise, a request can be sent to innheimtubref@islandsbanki.is to have a payment claim for the additional payment.
It is also possible to set up a subscription for regular extra payments, but the borrower must contact Íslandsbanki to enroll in that option.
If the intention is to pay off the loan fully, the borrower must contact Íslandsbanki.
There is no prepayment fee on loans from Gildi, and they can be paid off at any time.
The Central Bank of Iceland has set rules on the maximum payment burden for housing loans. The rules state that the payment burden of housing loans can be a maximum of 35% of disposable income, except in the case of first-time buyers, in which case it can be a maximum of 40%. The criteria for calculating the maximum payment burden according to the Central Bank’s rules are equal payments. For non-indexed loans, a loan term of 40 years and contractual interest rates are assumed, but with a minimum interest rate of 5.5%. For indexed loans, a loan term of 25 years and contractual interest rates are assumed, but with a minimum interest rate of 3%, even if the payment structure and loan term may differ.
You have to pass both a credit assessment and a credit rating. In order to get a loan, you have to provide a mortgage on a residential property in Iceland. The mortgage rate must never be higher than 70% of the appraised market value of the property. That value is based either on a recent purchase agreement or the property assessment for the current year. Loans are divided into basic loans and additional loans, depending on the mortgage rate. A basic loan has a mortgage rate of up to 60%, and an additional loan has a mortgage rate of 60–70%. The mortgage may not exceed 100% of the property’s fire insurance assessment plus the lot assessment. For example, the maximum loan for a property worth ISK 30 million is ISK 21.0 million, provided the fire insurance assessment condition is met. No amount greater than ISK 75 million is lent (including additional loans).
Gildi provides indexed property loans with fixed interest rates.
Gildi’s Board of Directors decides on changes to the interest rates of mutual fund loans. In those decisions, interest rates on the market for similar loans and the fund’s risk assessment are mainly considered, but other factors are also taken into consideration. They vary depending on the type of loan, but they can include the Central Bank of Iceland’s policy rates, deposit rates as well as historical and expected inflation. More information can be found in Gildi’s loan rules.
It generally takes 2–3 weeks to process a loan application. The borrower has to arrange for the bonds to be officially registered themselves; how long this takes varies between District Commissioner's offices.
The bonds themselves must be signed with two witnesses and submitted for official registration, then collected once registration is complete. A bond will not be paid out until the registered document has been received by the fund.
With equal instalments, the principal payment is the same for the duration of the loan term. The principal is paid off more quickly compared to loans with equal payments, but on the other hand, the payment load is higher to begin with and decreases with each instalment. The payment load decreases because interest payments decrease with decreasing principal. However, it should be noted that instalments and principal on indexed loans adjust in line with inflation.
On loans with equal payments (annuity), the monthly loan payment is always the same. The payment load is lower to begin with, and the principal is paid off more slowly in the beginning compared to loans with equal instalments. However, it should be noted that instalments and principal on indexed loans adjust in line with inflation.
The principal of an indexed loan is indexed based on the consumer price index. The principal must therefore be index-adjusted before regular instalments and interest are calculated. If we take an example of an ISK 10 million loan where the consumer price index increases by 1% between due dates, e.g., from 100 to 101 points, the principal also needs to be increased (index-adjusted) by 1%. It therefore increases from ISK 10 million to ISK 10.1 million before interest and instalment payments are calculated.
The principal of a non-indexed loan does not change in relation to the consumer price index. As a result, non-indexed interest rates are higher than indexed.
It can be said that an indexed loan generally involves a lower payment burden than a non-indexed one and slower asset formation.
Gildi currently provides only indexed loans with fixed interest rates.
Fixed interest rates mean that the interest percentage of the loan remains the same throughout the loan period.
Variable interest rates change according to the decision of the fund’s Board at any time. When determining interest rates, the yield on registered indexed bonds with a government guarantee, market interest rates on similar loans, and the fund’s risk assessment are taken into account.
Therefore, it can be assumed that interest rates will rise or fall during the loan period, which affects the payment burden of such loans.
Gildi currently provides only indexed loans with fixed interest rates.
The possible loan term is 5–40 years, at the choice of the borrower.
If the instalments or interest are not paid on the due date, late payment interest will be paid in addition to collection costs according to the tariff of a commercial bank or legal firm at each time.
If the contract is not fulfilled, Gildi may accelerate the entire debt without notice. As a last resort, the borrower’s home (mortgaged property) may be foreclosed.