Mortgage Loans

Fund members can choose between indexed loans with fixed or variable interest rate.
  

Loan with fixed interest rate

1. Loans are granted against a first right collateral in the property, with no limit on loan amount. (See mortgage limit in category 3 in conditions for pension loans)
2. Loan term is from 5 to 40 years, according to the borrower's choice.
3. Fixed interest rate 5.40%.
4. A choice between a loan with fixed amortizations or fixed payments (annuity).
5. Loans are indexed according to the Consumer Price Index.
6. Monthly payments.
   

Loan with variable interest rate

1. No limit on loan amount. (See mortgage limit in category 3 in conditions for pension loans)
2. Loan term is from 5 to 40 years, according to the borrower's choice.
3. Interest rate is now 3.99% (15 September 2010) and is 0.75% higher than the last months average yield for the most recent category of 30-year Housing Financing Fund bonds (HFF150434) in the transaction system of the Iceland Stock Exchange (NASDAQ OMX Nordic).
4. Loans are indexed according to the Consumer Price Index.
5. Monthly payments.

It takes about 2-3 weeks to review a loan application after receiving all necessary information.

Conditions for mortgage loans

1. Contribution payments must have been made for four of the last six months to the fund.
2. The borrower must present a summary of his/her liabilities at other credit institutions.
3. Loans are granted only against a mortgage. Existing mortgages, in addition to the fund's loan, may not exceed 65% of the property's assessed market value, as determined by a certified real estate agent or other specialist designated by the fund. The borrower pays the assessment cost.
4. The borrower must pay a registration fee (ISK 2,000) and stamp duty (1.5% of the loan). There is also a loan fee of 1%.

Documents which must be submitted with loan application

1. New statement of mortgages on the property (veðbókarvottorð) stamped by the District Commissioner's Office (sýslumaður). Note that a summary of mortgages (veðbandayfirlit) is not equivalent.New statement of the balance payable on existing loans, or most recent receipts for payments.
2. Copy of deeds with collateral in the property (tryggingarbréfum sem hvíla á eigninni).
3. Copy of registered contract of sale (þinglýstur kaupsamningur), if the property has changed ownership in the past three years.
4. Assessment from a certified real estate agent (löggiltur fasteignasali). (In consultation with the fund's staff)
5. Certificate of building insurance, if the property is under construction.
6. Permit for mortgage (veðleyfi) from the registered owners of the property.
7. Signed declaration (yfirlýsing/ábending) of the person/s granting the permit for mortgage. Forms for the permit for mortgage and the declaration are available from the fund's office.

Mortgages

Loans are only granted against a mortgage.

Existing mortgages, in addition to the fund's loan, may not exceed 65% of the property's assessed market value, as determined by a certified real estate agent or other specialist designated by the fund. The borrower pays the assessment cost.

Notes on mortgages

The Pension Fund of Commerce wishes to draw the attention of those who permit mortgaging of their property by applicants for loans to the fund, to the following:

1. Mortgages are intended to guarantee prompt and indemnified payments on the loan/bond, i.e. instalments, interest, indexation, penalty interest and other costs.
2. The fund's loans are usually long-term loans, for up to 40 years. The mortgage thus often exists for a long period.
3. In the case of default on the loan/mortgage, reminders are sent to the debtor, and not to the person who has granted the mortgage on his/her property.
4. Should the debtor not respond to reminders of payment, an application is made, in accord with the terms of the bond and the relevant legislation, for the mortgaged property to be sold at auction.
5. Experience has shown that this can lead to severe problems for the owner of the mortgaged property, who may be forced to pay off the loan in order to avert his/her property being auctioned. In some cases, the owner of the property has not been able to make such payment, and the property has then been auctioned.
6. When applying for a loan from the Fund, and putting up as collateral a property not owned by the applicant him/herself or his/her spouse, partner or civil partner, the applicant must submit a credit rating from the bank or other recognised financial body, confirming the applicant's ability to meet the payments on the loan.
   
   With the consent of the loan applicant, the person who is intending to provide collateral in a property may have access to the result of the credit rating. If the credit rating indicates that the loan applicant will not be able to meet his/her obligations, but the property owner is nonetheless willing to provide collateral, he/she shall confirm this in writing.
7. For this reason, the fund wishes to point out these issues, and urges the parties to study these points well, and be aware that if they are to permit a person to mortgage their property, they must have great trust in that person.
   
   

Mortgage transfer

In the case of mortgage transfer, existing mortgages, in addition to the fund's loan, may not exceed 65% of the property's assessed market value, as determined by a certified real estate agent or other specialist designated by the fund. The borrower pays the assessment cost.

The following documents must be submitted to the fund when a mortgage is to be transferred between properties

1. New statement of mortgages on the property (veðbókarvottorð) stamped by the District Commissioner's Office (sýslumaður). Note that a summary of mortgages (veðbandayfirlit) is not equivalent.
2. New statement of the balance payable on existing loans, or most recent receipts for payments.
3. Copy of deeds with collateral in the property (tryggingarbréfum sem hvíla á eigninni).
4. Copy of registered contract of sale (þinglýstur kaupsamningur), if the property has changed ownership in the past three years.
5. Assessment from a certified real estate agent (löggiltur fasteignasali). (In consultation with the fund's staff)
6. Certificate of building insurance, if the property is under construction.
7. Permit for mortgage (veðleyfi) from the registered owners of the property.
8. Signed declaration (yfirlýsing/ábending) of the person/s granting the permit for mortgage. Forms for the permit for mortgage and the declaration are available from the fund's office.

A mortgage may be transferred between properties in two ways:

1. The fund member carries out registration (þinglýsing) of the documents, and the transfer of the mortgage takes place in two stages. A declaration of the new mortgage is first registered (þinglýst) at the office of the District Commissioner (sýslumaður), then submitted to the fund, in return for a declaration that the prior mortgage has been lifted (veðbandslausn). This document must then be registered in the same way.
2. The transfer of mortgage can be carried out by a single document, via the fund, in return for a messenger fee.

Cost of preparing documents for each loan: ISK 2,000
Registration of loan: ISK 1,350
New statement of mortgages on property: 1,000
Messenger fee: ISK 750

Payment for preparation of documents, postal costs and registration must be made before the documents are registered, at the fund's office on the 5th floor. Payments may also be credited to the fund's account at Glitnir banki: 515-26-401144, kt. 430269-4459.

Loan application

It is important to read the fund´s loan rules and the following documents which must be submitted with the loan application.

1. New statement of mortgages on the property (veðbókarvottorð) stamped by the District Commissioner's Office (sýslumaður). Note that a summary of mortgages (veðbandayfirlit) is not equivalent.
2. New statement of the balance payable on existing loans, or most recent receipts for payments.
3. Copy of deeds with collateral in the property. (tryggingarbréfum sem hvíla á eigninni)
4. Copy of registered contract of sale (þinglýstur kaupsamningur), if the property has changed ownership in the past three years.
5. Assessment from a certified real estate agent (löggiltur fasteignasali). (In consultation with the fund's staff)
6. Certificate of building insurance, if the property is under construction.
7. Permit for mortgage (veðleyfi) from the registered owners of the property.
8. Signed declaration (yfirlýsing/ábending) of the person/s granting the permit for mortgage. Forms for the permit for mortgage and the declaration are available from the fund's office.
   

Collection of loan payments

Notice of the next payment date of the loan is sent out two weeks before the due date.

Loan payments must be made on due date. Penalty interest is charged from the due date.

Collection procedure:

Notice sent 15 days before due date.
Reminder sent 20 days after due date, demanding payment within 14 days.
Second reminder sent 40 days after the due date, if the reminder has been ignored. The second reminder demands payment within 14 days. 
Final reminder sent 60 days after due date. 
Sent to a lawyer for collection 90 days after due date.

Parties who permit another party to mortgage their property should notice that payment reminders are sent to the debtor, and not to the person whose property is mortgaged, until the mortgaged property is to be auctioned.

Loan payment service

Banks offer payment services which are convenient for payment of loans and other regular expenditure.

The person who has taken the loan makes an agreement with his/her bank for regular payments. This has several advantages for the client:

1. Fluctuations in payments over the year are balanced out.
2. No late payments and penalty costs.
3. No bills in the post.
4. A better overview of expenditure.

Contact your bank for more information on payment services,
or send us an e-mail and we will advise you.