Rules on loan

1. Entitlement to borrow

The applicant must have paid premiums into the Gildi Pension Fund, either the mutual insurance division or private supplementary divisions.




2. Interest and indexation

Borrowers may choose between indexed and non-indexed loans or a combination thereof. Indexed loans are available both with fixed interest and with variable interest. Non-indexed loans are available with variable interest. It is possible to choose between loans with annuity payments or regular instalments.

Loans are divided into basic loans and supplementary loans according to the mortgage ratio. Basic loans assume a mortgage of up to 65% of the value of the property in question. The supplementary loan is the proportion of the loan that is between 65–75% of the value of the property.

2.1 Basic loan, up to 65% of the mortgage ratio

2.1.1 Indexed loans with fixed interest

The fixed interest rate is based on the date of issue of the bond and is currently 2.80%. The loans are indexed based on the consumer price index.

2.1.2 Indexed loans with variable interest

The variable interest rate at present is 2.00%. Interest rate terms can change over the course of the loan period according to the decisions of the Board of Directors of the Fund. Account is mainly taken of the required rate of return of listed indexed bonds with state guarantees, market interest rate terms for comparable loans and the Fund’s risk assessment when determining interest rates. The loans are indexed based on the consumer price index.

2.1.3 Non-indexed loans with variable interest

The variable interest rate at present is 6.90%. Account is mainly taken of the policy rates of the Central Bank of Iceland, interest rates on deposits, the required rate of return of listed indexed bonds with state guarantees, historical and expected inflation, market interest rate terms for comparable loans and the Fund’s risk assessment when determining interest rates.

2.2 Supplementary loan, 65–75% mortgage ratio

2.2.1 Indexed loans with fixed interest

The fixed interest rate is based on the date of issue of the bond and is currently 3.55%. The loans are indexed based on the consumer price index.

2.2.2 Indexed loans with variable interest

The variable interest rate at present is 2.75%. Interest rate terms can change over the course of the loan period according to the decisions of the Board of Directors of the Fund. Account is mainly taken of the required rate of return of listed indexed bonds with state guarantees, market interest rate terms for comparable loans and the Fund’s risk assessment when determining interest rates. The loans are indexed based on the consumer price index.

2.2.3 Non-indexed loans with variable interest

The variable interest rate at present is 7.65%. Account is mainly taken of the policy rate of the Central Bank of Iceland, interest rates on deposits, the required rate of return of listed indexed bonds with state guarantees, historical and expected inflation, market interest rate terms for comparable loans and the Fund’s risk assessment when determining interest rates.

2.2.4 Condition on mortgage

Supplementary loan is only granted if Gildi Pension Fund has granted all other loans with priority security ranking on the same property. It is permitted to grant an exception from this rule if loans from other lenders are within 20% of the value of the property.

BASIC LOAN ADDITIONAL LOAN
(up to 65% mortgage ratio) (65-75% mortgage ratio)
INDEXED Fixed interest 2.80% 3.55%
INDEXED Variable interest 2.00% 2.75%
NON-INDEXED Variable interest 6.90% 7.65%




3. Loan amount

3.1

The minimum loan granted by the Fund is ISK 1,000,000.

3.2

The maximum amount of loans to an individual and spouse is ISK 75,000,000 in total (including supplementary loan) and also takes account of mortgage limits, as provided for in Article 5.4, and an assessment of the borrower’s payment ability and creditworthiness, as provided for in Article 6.

Notwithstanding the foregoing it is permitted to provide loans with security interest in the same asset for a higher amount than the maximum amount stated above in the event of refinancing of loans already granted by the Fund and the new loans (basic and supplementary loans) excluding costs are only used to fully pay up older outstanding loans provided by the Fund with security interest in the same asset.


4. Loan term and settlement

4.1

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

4.2

Instalments are paid twice a year, or more frequently, at the choice of the borrower.

4.3

The loan may be paid in full or in part without the imposition of a prepayment fee.


5. Property liens

5.1

Loans are only provided in exchange for a lien on the residential housing of the borrower. Loans are not provided for the purchase of property for commercial purposes, such as renting.

5.2

If the residential housing to be mortgaged to secure the loan is also partly or wholly owned by the spouse of the Fund member, a person cohabiting with the borrower, a person with whom the borrower is in a registered partnership, or partly owned by parents, such person must be the co-borrower (co-debtor) of the requested loan.

5.3

The Fund may also grant a loan to the parent of a Fund member in exchange for a property lien on his/her residential property.

5.4

The mortgage ratio may not exceed 75% with reference to the official real estate valuation („fasteignamat“) or a recent purchase agreement or accepted offer. The purchase agreement cannot be older than 6 months from the date of application. The mortgage ratio may never exceed 100% of the property’s fire insurance assessment and site valuation.

Notwithstanding the foregoing it is permitted to grant a supplementary loan with a mortgage ratio higher than 75% in the event of refinancing of loans already granted by the Fund and the new loans (basic and supplementary loans) excluding costs are only used to fully pay up older outstanding loans provided by the Fund with security interest in the same asset.

5.5

Buildings under construction are considered eligible as security for loans, provided that a certificate of weather tightness and fire insurance certificate, together with the valuation of a certified real estate agent selected in consultation with the Fund, is provided.

5.6

Loans may be granted in exchange for a lien on property subject to the provisions of legislation on social assistance housing, provided that at least 15 years have elapsed from the issue of the conveyance of title to the owner or any encumbrances have been lifted.

5.7

Loans are not granted if the property valuation is less than ISK 7,000,000 or if the property is purchased for less than ISK 7,000,000.

5.8

It is permitted to limit or decline a loan if the property resale options are limited or if there is uncertainly, on other grounds, regarding property value, for example with respect to the condition of the property.


6. Assessment of payment ability and creditworthiness

According to Article 20 of Act No. 118/2016 on Consumer Mortgages, the Pension Fund is generally under obligation to perform a payment ability assessment on the applicant. The Pension Fund, moreover, according to the provisions of the same Article of the same Act, is under obligation to assess the creditworthiness of the applicant. The Pension Fund may deny an application for a loan or limit the loan amount in the event that a creditworthiness and/or payment ability assessment reveals that the applicant does not have the financial strength to repay the loan or acceptable creditworthiness.


7. Borrowing costs

The loan fee is a fixed amount, ISK 55,000. Each additional bond has an incremental cost of ISK 9,000. The borrower pays the cost of payment ability assessments, creditworthiness assessments and other costs according to price list. The borrower is responsible for paying registration fees, as well as any bank collection costs.


8. Duty to inform the applicant

According to Article 13 of Act No. 118/2016 on Consumer Mortgages, the Pension Fund is under obligation to provide the applicant with information on the terms of the prospective loan on a standardised form together with providing general information on the development of price levels, interest and exchange rate of foreign currencies, as provided for in Article 14 of the same Act.


9. Loan application

The loan application form must state what documentation must be provided for the application to be considered valid. The applicant’s signature permits the Fund to seek information on the applicant’s payment ability and creditworthiness.


10. Lead time of loans

The processing of loans, by Gildi Pension Fund, can take 4 to 8 weeks after satisfactory documentation has been delivered to the Fund. After a loan has been approved, a bond is issued by the applicant and it must be registered on the property by the District Commissioner. Bonds are purchased (paid out) after registration by the District Commissioner.


11. Other

Gildi Pension Fund reserves the right to decline applications on any grounds.


12. Entry into effect

These rules shall enter into effect as of December 12th 2022.

The Fund reserves the right to investigate the borrower’s position on Creditinfo’s defaulters’ list.

Information on property valuations and fire compensation assessments may be obtained from the website of Þjóðskrá (at Registers Iceland).