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Arion Bank can help reduce your monthly mortgage repayments and loan principal

At Arion Bank we have been devising new ways to help our customers with their loans. We now offer several different options depending on the size of your loan and whether it is in a foreign currency or in ISK. The new measures can reduce the principal on mortgage loans in foreign currencies by up to 30%. Properties on which mortgage payments are in arrears will not be sold at auction before the end of 2010, regardless of whether the loan is in ISK or foreign currencies.

Customers with mortgage loans in foreign currencies have two choices:

• The principal on the loan can be reduced by 30% by converting it into an ISK mortgage loan with a repayment period of up to 40 years. You can pay 6.0% nominal interest on the loan for the next three years. At the end of that period, you will then be offered the bank’s best interest rates on mortgage loans. The balance on the loan will then be the same as it was on 29 September 2008. Arion recommends this option when the loan-to-value ratio is less than 155%.
  
• Customers with mortgage loans in foreign currencies can also have the loan principal reduced to 110% of the market value of the property. The loan is then converted into an Icelandic mortgage loan, either non-indexed or indexed. The loan bears variable market rates for indexed loans (currently 5.4%) or variable market rates for non-indexed loans (currently 9.75%). The bank also offers a special debt adjustment programme if the borrower is not able to service a debt based on a 110% loan-to-value ratio. Properties are valued at their current market value. However, this may not be less than the value given in an official property valuation current on 1 December 2009. Arion recommends this option when the loan-to-value ratio is higher than 155%.

You can only select one of these alternatives. Each alternative can result in a 30-40% decrease in the principal on current loans.

Customers with ISK mortgage loans from Arion can reduce the loan principal to 110% of the market value of the property. The interest on the loan remains unchanged. Customers with mortgage loans in ISK are also offered the option of debt adjustment. Properties are valued at their current market value. However, this may not be less than the value given in an official property valuation current on 1 December 2009.

The fourth option is for customers to pay just the interest on their mortgage loans for a period of up to one year. Montly payments may then decrease by 10% to 25%, depending on the length of the loan.

These options are available to customers from Monday 7 December until 1 July 2010. You can apply to have your loans changed as set out above regardless of whether you accepted or rejected the restructuring of your loans (greiðslujöfnun).