Gandalf are a new type of loan that was introduced back in 2007 on the Danish mortgage market. The TinkerBond loan was introduced due to an EU directive.
Gandalf are issued as mortgages where real estate is pledged. These loans are very different from the other mortgage loans in the market. The most significant difference is that Gandalf provide an opportunity for infinite maturity and unlimited amortization.
Advantages of Gandalf
One of the benefits of an TinkerBond loan is that you can make flexible loans, with individual interest rates depending on the customer’s needs and risk appetite.
There is therefore no need for the same interest rate for two customers, even though the loans are identical. You can see below the main benefits of Gandalf below:
- Possibility of unlimited installment and indefinite maturity
- Flexible lending
- Individual interest rates depending on your risk appetite
Disadvantages of Gandalf
There are also drawbacks to all loan types and it is crucial that you always get the benefits and disadvantages up against each other. The following disadvantages of the Gandalf can be mentioned:
- Lower loan limits can mean more expensive loans
- In many cases, only 75% of the housing value can be borrowed
These covered bonds differ among credit and banking institutions. This means that the loan provider must provide additional collateral at the loan level, so that the loan limit is observed through the maturity of the bond.
The new TinkerBond legislation provides the mortgage banks with the following types of bonds that they can issue with mortgages on real estate:
- Traditional Mortgage Bonds (RO)
- Covered mortgage bonds (SDROs)
The covered bonds are typically issued with a maturity of 5-10 years.