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.

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 points 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, unindexed 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.

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.

A loan is considered a basic loan if the mortgage rate is less than 60% of the property’s value.

A loan is considered an additional loan if the mortgage rate is from 60–70% of the property’s value.

Basic loan interest rates are more favourable than the interest rates of additional loans. You can find information about interest rates here.

You have to pass both a payment ability evaluation 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 relevant property. The estimated market value is based on a recent purchase agreement or property assessment of 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 appraisal plus the plot assessment.

As an example, the maximum loan for a property with a value of ISK 30 million is ISK 21.0 million as long as the conditions for a fire insurance appraisal are met. An amount greater than ISK 75 million is not lent (including additional loans). More information can be found in loan rules.

The borrower can choose from the following:

• Indexed loans with fixed interest.
• Indexed loans with variable interest.
• Non-indexed loans with variable interest.
• A combination of the above possibilities.

Gildi only grants housing loans

It generally takes 2–3 weeks to process a loan application.

The borrower himself has to get the bonds publicly registered; how long it takes varies depending on the District Commissioner’s Office.

The bonds themselves must be signed with two witnesses and submitted for official registration and collected once the registration has been completed. A bond will not be paid out until the registered document has been received by the fund.

Yes, it is possible to make additional payments on a loan.

If the person in question has online banking with Íslandsbanki, it is done with a command in the online banking, but alternatively, it is possible to transfer to account 0526-22-1, ID No. 421289-2639, and have the loan number in the reference (Íslandsbanki is the collection agency).

If a loan is being paid off, Íslandsbanki must be contacted with the prepayment value for the day the loan is paid off.

With equal instalments, the payment load is the highest at the beginning, but the total payments decrease as the loan period progresses. At first, the assets will be built up faster than with an annuity.

With an annuity, the payment load of the loan remains the same for the duration of the loan. To begin with, the repayment of principal is low, but the payment of interest is high. Over time, this is reversed.

Loan periods are between 5 and 40 years, at the choice of the borrower.

The borrower can dispose of a loan as needed, as long as the conditions of the loan rules are met, i.a. in terms of payment capacity and mortgage. Loans are not provided for the purchase of property for commercial purposes, e.g. renting.

There is no prepayment fee on loans from Gildi, and they can be paid off at any time.

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 move up the entire debt to the due date without notice. As a last resort, the borrower’s home (mortgaged property) may be foreclosed.