Loan policy

1. Right to apply for a loan

1.1

Members of Brú Pension Fund and LsRb can apply for a loan. In the case of two or more applicants, one must be a fund member.

1.2

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

1.3

Applicants do not need to be married or in registered cohabitation to qualify for joint loan application.

2. Provision of information

2.1

Before reaching a loan agreement, Brú Pension Fund will supply the applicant with a standard form including information on 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.

3.3

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

3.4

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

3.5

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

3.6

Applicants must apply for a loan together to undergo joint credit assessment. Joint application applies when there are two or more owners of the property being mortgaged for the loan. If the residential 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. 701/2022, 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 a part of the ownership has not previously been a registered owner of a real estate property, the part ratio will decide where between 35-40% the maximum lies.

The guideline for calculating maximum debt load, according to SÍ policy, is equal payments with a loan duration of maximum 40 years for a non-indexed mortgage loan and a maximum 25 years for indexed mortgage loans, even if the payment arrangement and duration of the loan may be different. The minimum reference for interest is the loan agreement interest rate (samningsvextir), although the reference interest 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, in addition to the credit rating not being below B. The overall loan amount for borrower(s) must not exceed 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 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) for the insurance of value.

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 over the course of the loan.

4.3.5

Variable interest rates may be increased or decreased by the Fund, according to the interest decisions of the Fund's Board. Interest and any changes to them are, among other things, 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 3 to 35 years.

4.4.2

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

4.4.2

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, among other things, 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 rate from 65% up to 75% of the purchase price.

4.5.2

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

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.

5.2

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

5.3

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 ranging 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.

5.4

The mortgage ratio must not exceed 100% of the combined fire insurance and ground property valuation.

5.5

Refinancing of the Fund's base loans may be subject to a mortgage ratio that exceeds the confines set by new loans. The loan department may allow such loans, since the loan amount remains unchanged and the granting of the loan meets all requirements.

5.6

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.

5.7

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.

5.8

The Fund reserves the right to decrease or refuse the granting of a loan if the real estate value is below ISK 15,000,000. The same applies if properties reside in areas where houses are unmarketable or unsellable, or if the value of the property is questionable, for example, because of its current condition. If necessary, the Fund reserves the right to call for more information about the property before a loan can be granted. Any costs that occur after a valuation by a legal real estate agency or the aquisition of data chall be paid by the applicant.

5.9

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.

5.10

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

5.11

A house that is currently being built can only be mortgaged if it is registered in building stages B2 or higher and the applicant supplies a fire insurance certificate from an insurance company as well as information on the applicant's plan to complete 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.

5.12

The Fund does not grant a loan with a mortgage in an unauthorized residential property.

5.13

According to SÍ policy nr. 550/2023, the overall 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 valuation or the purchase price of 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.

 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

A loan agreement is valid for three months, counting from when the applicant is first given notice, unless otherwise stated.

7.3

The Fund reserves the right to decline loan applications 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 date of publishing. Disbursement will proceed within two business days. The Fund may invalidate a mortgage deed that is not submitted within the correct time frame.

 10. Loan payoff

10.1

Borrower(s) may pay up a loan, partly or fully, without a payoff fee.

 11. Publishing

11.1

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