Loan policy

1. Right to apply for a loan

1.1

Members of Brú Pension Fund can apply for a loan given they have paid premiums to the fund for the six of the previous twelve months or that the member has a 36 month premium history with the fund.

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 this loan policy must be met to qualify for a loan.

2. Provision of information

2.1

Before a loan agreement is made, Brú Pension Fund will provide a standard form with information about real estate loans, on the Fund's web portal. In addition, and where applicable, the Fund will provide general information about the evolution of prices and interest rates and and the impact of these factors on changes in the principal and payment burden. This disclosure of information is based on general information and examples that the Consumer Agency publishes on their website.

2.2

The pension fund does not provide loan consultation, according to Act No.118/2016 on Mortgage Loans to Consumers.

2.3

The fund's website displays an interest rate table showing the fund's interest rates, a price list that provides information on the cost of borrowing, a loan calculator, a preliminary payment assessment and general information on mortgages.

 3. Credit capacity and credit rating assessment

3.1

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

3.2

Information on credit ratings is obtained from Creditinfo after the applicant provides consent to access. If credit rating cannot be obtained due to defaults or if the credit rating is C3 or lower, the application will be denied. In exceptional cases, the Credit Committee is authorised to base its decision on a credit rating from the home country of applicants who have recently moved to Iceland, provided that the applicant can demonstrate that such an assessment is based on a methodology comparable to that used by Creditinfo.

3.3

Income for the past 12 months must be demonstrated by submitting an Income Tax report from the Icelandic Revenue and Customs. In the case of self-employed persons, only wages are taken into account in the credit assessment that are according to the statement of withholding tax from the Directorate of Internal Revenue.

3.4

Rental income will not be included in the credit assessment.

3.5

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

3.6

Multible applicants who 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 residential property is owned solely by a fund member, the credit assessment shall only be based on his/her income, assets and liabilities.

3.7

According tothe Central Bank of Iceland's ruleson the maximum payment-to-income ratio of mortgage loans, the maximum monthly payment-to-income ratio of mortgages is 35% of monthly disposable income. However, the maximum is 40% in the case of the purchase of a first property. If some of the owners have not previously been registered owners of residential property, their relative ownership determines where the 35-40% maximum lies.

3.8

The criteria for calculating the maximum payment-to-income ratio according to SÍ policy is as follows: Non-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 above ISK 50,000,000 is requested, the fund will have increased requirements for payment capacity and mortgage ratio and the credit rating may not be lower than B. The total loan amount of each borrower(s) is a maximum of ISK 95,000,000.

4.2

There are 12 due dates per year. The loan can be with equal installments or equal payments of interest and installments (annuity loan).

4.3 Indexed mortgage loans

4.3.1

The loan duration can be 5 to 40 years if the total mortgage is less than 65% of the property value. If the mortgage is higher, the maximum loan duration is 35 years.

4.3.2

Indexed loans are tied to Consumer Price Index (CPI) for indexation.

4.3.3

Loans with indexed rates have a fixed interest rate that does not change during the loan period.

4.4 Additional mortgage loans

4.4.1 

In the case of real estate purchases, the fund offers an additional loan that covers a mortgage from 65% up to 75% of the purchase price.

4.4.2

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

4.4.3

The maximum loan period is 35 years and the loan carries an indexed fixed interest rate plus a 1% interest premium.

4.5.4

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

 5. Mortgage

5.1

Mortgage loans are only granted for a residential property in Iceland that the applicant owns and lives in.The property must be in building stages B3 or B4, and assessment level 7 or 8, according to Registers Iceland (HMS).

5.2

When calculating mortgage ratios if a loan is granted without the purchase of real estate, the most recent property valuation applies.

5.3

In the case of refinancing, the maximum mortgage is 65% of the property value.

5.4

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

5.5

The mortgage can not 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  mortgage exceeds 65% of the property 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 against collateral.

5.9

The fund reserves the right to decrease the loan ratio or refuse the granting of a loan if property value is below ISK 15,000,000. The same applies if the property is 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 agains a mortgage in a property that is subject to welfare residency obligations if the municipality's duty of purchase has lapsed and the property otherwise meets the fund's requirements.

5.11

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

5.12

A house under construction is considered eligible for a mortgage if the property is registered at building stages B2 or higher and the applicant submits a fire insurance certificate from an insurance company along with information on how the applicant intends to complete the construction of the property and its financing. In that case the maximum mortgage ratio is 55%. The maximum mortgage is then 55%. It is not permitted to change or terminate fire insurance.

5.13

The Fund does not lend against collateral on unapproved residential property.

5.14

The loan division is permitted to make an exception to the maximum mortgage ratio (section 5.3) when applying for a loan for the maintenance of a multi-owner building that has been decided by a house meeting in accordance with the Act on Multi-Owner Buildings.

 6. Loan application and supporting documents

6.1

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

6.2

A loan application is valid for two months from the time it has been received.

 7. Granting of loan

7.1

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

7.2

Approval for a 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 reject loan applications based on the loan committee's assessment and the fund's interests as a lender.

 8. Cost of loan undertaking

8.1 

The cost is according to the fund's price list at any given time.

Price list

 9. Disbursement

9.1

The applicant must submit  a notarized bond payable (skuldabréf) within two months from the date of issue. The fund may invalidate a mortgage deed that is not returned within this time.

 10. Loan payoff

10.1

Loans can be paid in part or in full during the loan period without a payment fee.

 11. Publishing

11.1

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