No conditions are set as to what the loan can be used for, except in the case of conditional authorisations for a mortgage.

The maximum loan amount is 70% of the property valuation or the purchase price if it involves a real estate purchase. The appraisal value is not considered.

If the loan-to-value ratio from other lending institutions exceeds 20% of the available collateral, the maximum mortgage amount is 65% of the property valuation or the purchase price in case of a real estate purchase.

If the current recalculated mortgage debts, including the additional loan from the fund, exceed the maximum loan amount from the fund, the evaluation is based on the fund's best interests, despite collateral ratio rules.

The loan term can range from 5 years to 40 years. The maximum loan term for an additional loan for first-time buyers is 25 years.

There are 12 payment due dates per year.

First-time buyers can apply for an additional loan if it maintains the same lien priority as the first loan, with a maximum loan-to-value ratio of 85%. The additional loan is non-indexed with a fixed interest rate for 3 years, and a 0.75% interest rate premium is added. The maximum term for the additional loan is 25 years.

First-time buyers are eligible for loans from the fund if they have made at least one contribution to the fund or a private pension savings plan.

There are no prepayment fees on the fund’s housing loans, meaning borrowers can repay the loans or make additional payments at any time.

According to regulations from the Central Bank of Iceland, the payment-to-income ratio (the proportion of income spent on housing loan payments) must not exceed 40% for first-time buyers.

Yes. Loans can be paid off at any time without any prepayment charge. Please include the number of the loan in the explanation/payment reference.

Payments can be deposited in account 0515-26-010200, ID no. 430269-4459.

If a person other than a spouse or life partner, i.e. who is married to or in a registered partnership with the borrower, is the borrower's co-owner of the property a mortgage cannot be granted for that property.

When a loan has equal instalments, the same amount is paid towards the principal throughout the entire term. Monthly payments are higher initially and decrease over time as the interest burden decreases. This results in faster equity buildup. 

When a loan has equal payments, the monthly payment amount remains constant over the loan term (if the loan is inflation-indexed, it increases). Monthly payments are lower initially, but equity accumulation is slower. 

The loan calculator calculates the payment burden of the loan and how payments are distributed over the loan term.

If someone other than the spouse, who is married or in a registered partnership with the borrower, co-owns the property with the borrower, it is not possible to obtain a loan against that property. 

Yes, if they own the property offered as collateral in whole or in part alongside the borrower. The spouse also needs to become a co-borrower if their creditworthiness is assessed along with the borrower.

No, third-party mortgage is not an option.  

A notification is sent to the relevant party at least 30 days before the interest rate change takes effect, in accordance with Article 35 of Act No. 118/2016 on Consumer Mortgages. If you take no action, the interest rate on your loan will be fixed again for another five years at the terms available for such loans at that time. Information about current interest rates can be found on the fund's website.

No, only credit assessments from LV (Pension Fund of Commerce) are accepted. Before a mortgage agreement is made, the creditworthiness and payment capacity of all applicants must be assessed.

For information on creditworthiness and payment capacity assessments, refer to items 6 and 15, paragraph 1 of Article 4, as well as Articles 20, 22, 23, and 24 of Act No. 118/2016 on Consumer Mortgages.

The interest rates on LV member loans are based on the pricing of bonds in the market. Interest rate decisions primarily rely on the so-called interest rate bridge, a methodology that calculates an interest margin over risk-free rates. Risk-free rates are assessed based on the yield on government bonds, while the interest margin is determined for each risk factor associated with member loans. Based on this, a proposal is submitted to the fund's board regarding the interest rates for member loans, and the board makes the final decision on their interest rates.

When interest rates rise, it is inevitable that the interest rates on member loans will increase to remain competitive with the fund's other investment opportunities, such as government bonds or covered bonds. Similarly, when interest rates fall, this is reflected in lower interest rates on member loans, aligning the rates with the overall interest rate trends in the country. LV aims to invest members' funds in the best possible environment, considering the interest rates set by the Central Bank of Iceland and the terms available in the bond market.

Interest rate decisions for member loans are based on a theoretical foundation.

To explain further, it is necessary to detail the assumptions behind the interest rate decisions for the bonds the fund invests in, including member loans as one of these investment options. In brief, bond pricing is calculated using a methodology that takes into account the following factors:

• Risk-free market rates: This considers the yield on government bonds in the securities markets. Risk-free rates are calculated based on an assessment of the yield curve derived from government bonds. This approach allows for the evaluation of risk-free rates for different maturities based on market conditions. The rates corresponding to the term of each loan type are then used as the risk-free rates for the respective member loan.
• Covered bond interest margin: This uses the margin on covered bonds over government bonds of the same maturity. Covered bonds issued by commercial banks are secured by collateral in diversified mortgage portfolios of the banks, sharing some characteristics with member loans. The yield demanded by investors for such bonds forms the basis for pricing member loans. For loans with variable interest rates, the shortest covered margin observed in the market or the best available estimate is used.
• Borrower risk premium: In determining the interest rates for member loans, the fund conducts a risk assessment to determine the borrower risk premium, reflecting the additional risk taken by the fund in lending to individuals compared to holding covered bonds.
• Liquidity premium: This considers whether a bond is liquid like government bonds or if a discount is likely required for sale, as with illiquid bonds. Member loans are classified as illiquid bonds, which is reflected in the interest margin.
• Administrative premium: This accounts for the cost of managing member loans, including the operation of the loan department and the involvement of the fund's specialists in asset management, risk management, or legal services, among others.
• Prepayment premium: This prices the option for the borrower to repay the loan without a prepayment fee. It is generally better for the lender to secure long-term interest rates rather than risk the loan being repaid and then having to reinvest in a less favorable bond. The right to prepayment is thus priced and reflected in the prepayment premium.

These six factors together form the assessment of the interest rates applicable to member loans. These factors change based on the nature of the securities markets at any given time. If the Central Bank of Iceland raises interest rates, the yield on government bonds is expected to increase, thereby raising the interest rates on member loans. Conversely, if the Central Bank of Iceland lowers interest rates, bond market rates generally fall, and this is reflected in lower interest rates on member loans.

If a debtor cannot pay the loan instalments, interest or indexation on the due date, the entire loan falls due without prior notice. The debtor will have to pay penalty interest from the due date, at the rate determined by the Central Bank of Iceland, as provided for in the first paragraph of Art. 6 of Act No. 38/2001, if he/she fails to make a payment on time, in addition to all the costs resulting from the default.

The final outcome could be that your home may have to be sold at a forced auction if you fail to make your payments.

The Central Bank has issued rules for the maximum mortgage loan debt in proportion to the borrower's income.

The maximum monthly payment for all real estate loans of the borrower may not exceed 35% of the consumer's monthly disposable income when a real estate loan is granted. However, the maximum may be 40% in the case of a first real estate purchase.