Payment cap is a new way to temporarily reduce the repayment burden of your mortgage
When you set a payment cap on your loan, you pay a fixed amount for twelve months, which is lower than the monthly payment according to the loan terms. The difference is added to the principal of the loan, resulting in an increase in the loan balance. This will entail a higher repayment burden on the loan once the payment cap period ends.
The fixed monthly amount is based on you paying 1, 2, 3, or 4% lower interest than your loan currently carries.
Can a payment cap be applied to all loans?
A payment cap can only be applied for on non-indexed mortgage loans with variable or fixed interest rates.
If a payment cap is applied for on a mixed mortgage loan, only the non-indexed portion of the loan will receive a payment cap, not the indexed portion.
If a loan is transitioning from fixed interest to variable interest, it is possible to apply for a payment cap at the same time as the new payment slip has been issued.
What conditions do I need to meet
to be eligible for a payment cap?
Your mortgage must be in good standing and you must not have been in arrears in the past 6 months. Furthermore, the total debt ratio of the property may not exceed 70% of the property's value.
The purchase price is used as a reference if the purchase agreement for the property was signed within 12 months; otherwise, the property assessment value is used.
How do I apply for a payment cap?
You apply for a payment cap electronically no later than two days before the end of the month in which you want the payment cap period to begin. You must then sign the documents before the 1st day of the following month.
A processing fee of ISK 9,995 is charged per loan, which is added on top of the first instalment after the payment cap begins.
During document processing, the bank is required to obtain a mortgage certificate for the property.
The mortgage certificate is obtained electronically from the District Commissioner's office, and the cost of this is included in the processing fee.
Do you offer a payment cap for
customers of other banks/pension funds?
A payment cap is only available to customers who hold a mortgage with Arion Bank. We encourage you to contact us at ibudalan@arionbanki.is or via the live chat on our website if any questions arise.