Interest-Free Loans for First-Time, Low-Income Buyers Skip to content
Photo: Dragan Maksimovic, CC 3.0.

Interest-Free Loans for First-Time, Low-Income Buyers

If passed, a new bill would see the Icelandic government provide low-income buyers interest-free loans of 20% of the purchase price of their first apartment, RÚV reports. The 20% loan would not require any repayment; rather, the state would recoup 20% of the apartment price at the time of sale.

The bill was proposed by Minister of Social Affairs and Equality Ásmundur Einar Daðason. The income threshold to qualify for the loans would be ISK 7.6 million ($56,400/€50,900) a year for individuals and ISK 10.6 million ($78,700/€69,700) a year for married or cohabitating couples. These thresholds would increase by ISK 1.6 million ($11,900/€10,500) per child or teenager residing in the home.

Per the loan terms, the buyer(s) would put up a minimum of 5% of the purchase price themselves. Up to 75% of the cost would be funded by a loan from a lending institution, and the remaining 20% would come from the government. The government loan would be for 25 years and would not accrue interest or require repayment during that period unless the buyer’s income increased beyond the aforementioned thresholds for three consecutive years during the loan period.

Helping People Get Out of the Rental Market

Ásmundur Einar explained that these loans are aimed at helping people out of the rental market and that the bill represents a significant priority for him. “We are here to help people who haven’t been able to enter the real estate market, but have been stuck [renting]. Both union leadership and the business community have called for this, which is why it has formed the backbone of the government’s housing package and living wage contract.”

The loan would also benefit those who have not owned property in at least five years, thereby aiding those who lost their homes in the wake of Iceland’s 2008 economic collapse. The loans are furthermore intended to go towards new builds, explained Rún Knútsdóttir, a lawyer at the state housing association. “[T]his way, we’re actually also helping to ensure that supply increases commensurately with demand.”

If the bill passes, the government could be expected to put ISK 4 billion ($29.7 million/€26.3 million) towards these home loans in the coming years.

The full loan conditions would be as follows:

  • Loans would only be applicable for apartments in new buildings
  • Loans would only be available to purchase apartments under a specified price limit
  • Loans would only be available to first-time buyers or those who have not owned property in the last five years
  • Loans would only be available to those who cannot make a down payment and are pre-approved
  • A lendee’s mortgage repayments could not be more than 40% of their disposable income

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