HMS housing loans

The Central Bank of Iceland has established rules on what percentage of paid wages (after tax) may be used to pay off housing loans. This is called a payment burden ratio. It is calculated from the joint wages of married couples and couples registered in cohabitation.

• The maximum ratio is 35% of paid wages

• The maximum ratio for first buyers is 40%.

• The maximum ratio for those who owned property in Grindavík on November 10, 2023, is 40% (valid until March 1, 2027).

Example**:**

A married couple or a couple registered in cohabitation, applies for a loan.

• Their joint wages (after tax) is ISK 1.000.000 per month.

• Their maximum monthly housing loan payment can not exceed ISK 350.000 (35%) .

• If they are first buyers the maximum monthly housing loan payment can be ISK 400.000 (40%).

Note: Things are not necessarily this simple. The ratio calculations are based on loan preconditions according to the rules of the Central Bank of Iceland, and they may not be the terms offered.

The main rule is:

• For non-indexed loans the loan period can be up to 40 years but the interest rate can not be lower than 5,5%.

• For indexed loans the loan period can be up to 25 years and the interest can not be lower than 3%.

So if you take out an indexed loan for 40 years, the payment burden ratio is still calculated based on the loan terms of a 25 year loan. Since the calculations are based on a shorter loan term, the monthly instalments are possibly higher.

To better understand what your monthly instalment will be with different criteria, you can use the HMS Loan calculator .

Payment burden ratio is calculated in the credit rating process after an application has been submitted.