Question 1

What does "first-time buyer" mean?

Accepted Answer

First-time buyer refers to someone who has never owned property in Iceland before. This status grants you various benefits like higher loan-to-value ratio (90% instead of 80%), lower stamp duty (0.4% instead of 0.8%), and tax-free access to pension savings.

Question 2

What is loan-to-value ratio (LTV)?

Accepted Answer

Loan-to-value (LTV) is the ratio of the loan to the property value. If you buy a property for 60 million and get a 54 million ISK loan, the LTV is 90%. First-time buyers can get up to 90% LTV, others 80%.

Question 3

What is debt service-to-income ratio (DSTI)?

Accepted Answer

Debt service-to-income (DSTI) is the ratio of monthly loan payments to disposable income. The maximum is 40% for first-time buyers and 35% for others. If you earn 600,000 ISK after tax, your loan payments cannot exceed 240,000 ISK.

Question 4

How long does the buying process take?

Accepted Answer

The property buying process in Iceland typically takes 12-20 weeks. This depends on circumstances, financing, and how quickly all parties respond. It's important to have pre-approval from a bank before making an offer.

Question 5

What is private pension savings?

Accepted Answer

Private pension savings is additional retirement savings that you and your employer contribute beyond the mandatory pension fund contribution. You can withdraw this savings tax-free when purchasing your first property.

Question 6

How much can I withdraw?

Accepted Answer

You can withdraw up to 500,000 ISK per year for up to 10 years, or 5 million ISK total. If you're in a partnership/marriage, both parties can apply, doubling the amount to 1 million per year or 10 million total.

Question 7

When should I apply?

Accepted Answer

You should apply immediately after the purchase agreement is signed. Processing time is 4-6 weeks, so it's important to start the process early. You have 12 months from signing the purchase agreement to apply.

Question 8

What does 30% ownership share mean?

Accepted Answer

To receive your pension savings, you need to be the registered owner of at least 30% of the property. If you buy with a spouse and each own 50%, you meet this requirement.

Question 9

Can I also withdraw the returns?

Accepted Answer

No, only contributions (your and employer's payments) can be withdrawn, not accumulated returns. The returns are still your property but are locked until retirement age.

Question 10

What's the difference between indexed and non-indexed loans?

Accepted Answer

Indexed loans have lower interest rates (3-5%) but the principal increases with inflation. Non-indexed loans have higher rates (8-10%) but the principal remains stable. Which is better depends on inflation outlook and your preferences.

Question 11

What are current interest rates?

Accepted Answer

Interest rates change regularly. Indexed loans typically have lower rates than non-indexed. Pension funds often offer better terms than banks. See the latest rates in our calculator or check directly with lenders.

Question 12

What is the Central Bank policy rate?

Accepted Answer

The policy rate is set by the Central Bank of Iceland and affects all interest rates in the economy. It's updated regularly and shown in our calculator. Non-indexed loans with variable rates are often policy rate + 2-3% margin.

Question 13

How long can I get a loan for?

Accepted Answer

Indexed loans are typically up to 25-30 years. Non-indexed loans can be up to 40 years. Longer loan terms mean lower monthly payments but more total interest.

Question 14

Is it better to get a loan from a bank or pension fund?

Accepted Answer

Pension funds often offer lower rates than banks, especially on indexed loans. However, the maximum LTV is lower (often 70-85%) and you need to be a fund member. Best to compare offers from both.

Question 15

What is a shared equity loan?

Accepted Answer

A shared equity loan is an interest-free and payment-free loan from HMS covering up to 25% of the purchase price (up to 35% for lower-income buyers). You contribute 5%, HMS up to 25%, and the bank 70%. The loan changes with the property value and is repaid upon sale.

Question 16

Who can apply for a shared equity loan?

Accepted Answer

First-time buyers who meet income limits can apply. For 25% loan: single up to 10M ISK/year, couples up to 15M. For 35% loan: single up to 6.8M, couples up to 10.6M. Addition of 2,254,000 ISK per child under 20. The property must also be a new build approved by HMS.

Question 17

How does repayment work?

Accepted Answer

You don't pay off the shared equity loan while you own the property. When you sell, HMS gets their share (up to 25%) of the sale price back. If the property increased in value, you get less; if it decreased, you get more. This is the "shared equity" in the value.

Question 18

What happens when an offer is accepted?

Accepted Answer

When the seller accepts your offer, it becomes a binding contract. The process then begins of finalizing the purchase agreement, paying the deposit, and completing financing. It's important to have conditions in your offer for financing and inspection.

Question 19

What is a purchase agreement?

Accepted Answer

A purchase agreement is a formal document signed by both parties. It contains all information about the property, price, payment terms, and handover date. Two witnesses need to confirm the signatures.

Question 20

What is deed transfer and registration?

Accepted Answer

Deed transfer is a document confirming change of ownership. Registration is recording the deed with the district commissioner making you the official owner. This must be done within 2 months of handover, otherwise stamp duty increases.

Question 21

What costs are there beyond the purchase price?

Accepted Answer

Beyond the purchase price, you need to pay stamp duty (0.4% for first-time buyers), registration fee (3,800 ISK), and possibly loan origination fee (often waived for first-time buyers). Home inspection costs 50-100 thousand ISK and is highly recommended.

Question 22

Do I need to have the property inspected?

Accepted Answer

Home inspection is not mandatory but highly recommended. A professional inspection can prevent expensive unexpected repairs. The cost is 50-100 thousand ISK which could save you millions in the future.

Question 23

What should I check during inspection?

Accepted Answer

Main items are: roof, exterior walls, windows, moisture/mold, heating and electrical systems, plumbing, and ventilation. For apartments, also check the housing association's finances and planned maintenance. Use our checklist!

Question 24

What are housing fees?

Accepted Answer

Housing fees are monthly charges that apartment residents pay for shared costs: heating of common areas, cleaning, maintenance, insurance, etc. The amount can be 10-50 thousand ISK per month depending on building size and age.

Question 25

What is a condominium agreement?

Accepted Answer

A condominium agreement is a document defining rights and obligations of owners in a multi-unit building. It contains rules about use of common areas, modifications to units, and more. This document is necessary when selling an apartment.

FAQ for First-Time Buyers

Basics

Pension Savings

Loans and Interest

Shared Equity Loans (HMS)

The Buying Process

Inspection and Housing Association

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