Loan policy

1. Right to apply for a loan

1.1

Members of Brú Pension Fund can apply for a loan.

1.2

In the case of two or more applicants, one must be a fund member. Applicants do not need to be married or in registered cohabitation to qualify for joint loan application.

1.3

The conditions of the loan policy must be met to qualify for a loan.

2. Provision of information

2.1

Before reaching a loan agreement, Brú Pension Fund will supply the applicant with a standard form, including information about real estate loans, through the Fund's web portal. Additionally and where appropriate, the Fund will provide general information about the evolution of price levels and interest and how they may affect the loan principal and debt load. The provision of information is based on standard information and examples from the Consumer Agency, publicly available on their website.

2.2

Brú Pension Fund does not provide loan consultation, according to act nr 118/2016 about consumer mortgage loans.

2.3

On Brú Pension Fund's website you will find a table showing interest options, a loan calculator, temporary credit assessment and standard information about mortgage loans.

 3. Credit capacity and credit rating assessment

3.1

Brú Pension Fund carries out a credit assessment and evaluates applicant's qualifications for a loan.

3.2

Information about credit rating is collected from Creditinfo after the applicant has granted their consent. If credit rating cannot be collected due to defaults or if the credit rating is C3 or lower, the loan application will be denied. In special cases the assessment may be based on information from the applicant's home state in cases where the applicant has recently moved to Iceland, given that the rating uses similar assessment methods to Creditinfo.

3.3

Applicant's income for the last 12 months must be proven by submitting an Income tax report from Icelandic Revenue and Customs. For self-employed individuals, the income stated in the Income Tax Report from the Iceland Revenue and Customs will solely be considered.

3.4

Rental income is not taken into account in the credit assessment.

3.5

Income in other countries is not included in the credit assessment, due to loans not being applicable in a foreign currency. For the same reason, the applicant must have a residence in Iceland.

3.6

Applicants that apply for a loan together undergo joint credit assessment. Joint application applies when there are two or more owners of the property being mortgaged for the loan. If the property is exclusively owned by one fund member, the credit assessment will exclusively rely on that fund member's income, properties, and debts.

3.7

According to SÍ policy nr. 206/2024, the maximum monthly debt load for a real estate loan is 35% of monthly measured income at the time of granting the loan. The maximum is 40% in the case of first purchase. If one or more out of multible owners have not previously been a registered owner of a real estate property, the ownership share will decide where between 35-40% the maximum monthly debt load lies.

The guide for maximum debt load, according to SÍ policy is as follows: No-indexed loan of maximum 40 years with equal payments, and indexed loan of maximum 25 years with equal payments. The guide applies even if the payment arrangement of the actual loan is different. The minimum reference for interest is the interest rate of the loan agreement, however, the reference cannot be lower than 5.5% for non-indexed loans, and 3% for indexed loans. 

 4. Loan amount and loan conditions

4.1

The minimum loan amount is ISK 2,000,000. If the loan amount exceeds ISK 50,000,000 the fund makes higher demands for payment capacity and mortgage ratio and the credit rating cannot be lower than B. The maximum loan amount is ISK 95,000,000.

4.2

There are 12 due dates per year. The choice is between a loan with equal installments or equal payments of interest and installments.

4.3 Indexed mortgage loans

4.3.1

The loan duration can be from 5 to 40 years if the overall mortgage ratio is below 65% of the real estate evaluation. If the mortgage ratio is higher, the maximum loan duration is 35 years.

4.3.2

Indexed loans are indexed to consumer price index (CPI).

4.3.3

Interest rates for indexed loans can be fixed or variable.

4.3.4

Fixed interest rates for indexed loans do not change during the course of the loan.

4.3.5

Variable interest rates may be increased or decreased according to the decisions of the Fund's Board. Interest and any changes to them are based on required rate of return of non-indexed bonds published by banks and financial institutions in Iceland, the State Treasury or municipalities, and/or the policy interest rates by the Central Bank of Iceland (Seðlabanki Íslands), counterparty risk and operational costs.

4.4 Non-indexed mortgage loans

4.4.1

The loan duration can be from 3 to 35 years.

4.4.2

Non-indexed loans are solely granted as additional loans, see article 4.5.

4.4.3

Interests for non-indexed loans are variable and may be increased or decreased according to the decisions of the Fund's Board. Interest and any changes to them are are based on required rate of return of non-indexed bonds published by banks and financial institutions in Iceland, the State Treasury or municipalities, and/or the policy interest rates by the Central Bank of Iceland (Seðlabanki Íslands), counterparty risk and operational costs.

4.5 Additional mortgage loans

4.5.1 

In the case of real estate loans, the fund offers an additional loan that covers the mortgage ratio from 65% up to 75% of the purchase amount.

4.5.2

In the case of first property purchase, the additional loan can cover the mortgage ratio from 65% up to 85% of the purchase amount.

4.5.2

The maximum loan period is 35 years and is subject to non-indexed interest with additional 1% interest premium.

4.5.3

Additional loans are only granted in the continuous lien order of the fund.

 5. Mortgage

5.1

Mortgage loans are only applicable for residential properties that are owned and lived in by the applicant. The property must be in building stages B3 or B4, and assessment level 7 or 8, according to Registers Iceland (HMS).

5.2

When a new loan does not iclude a purchase of a property the mortgage ratio calculations are based on the most recent real estate evaluation.

5.3

The maximum mortgage ratio is 65% of the assessment value when refinancing.

5.4

In the case of property purchase, the fund will consider the purchasing amount to be according to the purchase offer or an official purchase aggreement. The applicant can apply for an additional loan that covers the ratio from 65% to 75% of the purchase amount. If the applicant meets the conditions under section 4.5.2 the rate can be up to 85% of the purchase amount.

5.5

The mortgage ratio cannot exceed 100% of the combined fire insurance and ground property value.

5.6

A refinancing of the fund's base loans may be subject to a mortgage ratio that exceeds the confines set by the new loan. The loan division may allow such loans, as the loan amount remains unchanged and the granting of the loan meets all other requirements.

5.7

The Fund requires loans to be in 1st lien priority or in a continuous lien order if the overall mortgage ratio exceeds 65% of the assessment value.

5.8

If there are more than one owners of the real estate property that are being mortgaged for the loan, it is necessary that the loan undertaking be joined by all owners. Loans are not granted with a borrowed mortgage.

5.9

The fund reserves the right to decrease the loan ratio or refuse the granting of a loan if the value of the real estate is below ISK 15,000,000. The same applies if the property resides in an area where houses are unmarketable or unsellable or if the value of the property is questionable because of its current condition. If necessary, the fund reserves the right to call for more information about the property before a loan is granted. Any costs that occur during evaluation by a legal real estate agency and any aquisition of data is paid by the applicant.

5.10

Loans may be granted with the mortgage in a residential property under welfare residency obligations if the municipality's duty of purchase has lapsed and the property otherwise meets the requirements of the fund.

5.11

If a residential property is under obligation/encumbrance that may affect it's price, the maximum mortgage ratio is 55%.

5.12

A house that is currently being built can only be mortgaged if it is registered in building stages B2 or higher and the applicant submits a fire insurance certificate from an insurance company and information about about the completion of the construction of the property and it's financing. In that case the maximum mortgage ratio is 55%. Retracting or changing the fire insurance is not permitted.

5.13

The fund does not grant loans with the mortgage in an unauthorized residential property.

5.14

According to SÍ policy nr. 217/2024, the maximum mortgage ratio of a real estate property, at the time of loan and taking into account other loans that apply to the property, cannot exceed 80% of the real estate value or the purchase amount for the property. The maximum mortgage ratio may go up to 85% in the case of a first purchase. If a part of the ownership has not previously been a registered owner of a real estate property, the part ratio will decide where between 80-85% the mortgage ratio lies.

5.15

The loan division is permitted to make an exception to the maximum mortgage ratio (section 5.3) in cases where the purpose of the loan is for repairs of a mutually owned apartment building that have been voted on and agreed to during an official house meeting.

 6. Loan application and supporting documents

6.1

A loan application and supporting documents must be submitted electronically through the fund's application website.

6.2

A loan application is valid for two months after being received by the fund.

 7. Granting of loan

7.1

The loan committee decides if a loan will be granted and the applicant will be informed when a decision is final.

7.2

An accepted loan is valid for three months from when the applicant is first given notice, unless otherwise stated.

7.3

The Fund reserves the right to decline a aloan application based on the loan committee's assessment and the fund's interests as a lender.

 8. Cost of loan undertaking

8.1 

Cost is according to the fund's most current price list.

Price list

 9. Disbursement

9.1

The applicant must submit to the fund a notarized bond payable (skuldabréf) within two months from the publishing date. The fund may invalidate a mortgage deed that is not submitted within the correct time frame.

 10. Loan payoff

10.1

Loans can be paid fully or partially without a fee.

 11. Publishing

11.1

The loan policy will be published on the fund's website www.lifbru.is