Using Private Pension Savings to Pay Down a Mortgage
You can use your private pension savings to make monthly payments towards your residential mortgage for up to 10 years. The mortgage must be for a home that you own and live in.
The application will be available on the Iceland Revenue and Customs service website in early October. Applications submitted before 1 December 2026 will apply to monthly payments for the entire year, from 1 January 2026.
Conditions
To use private pension savings to make payments towards a residential mortgage, you must:
own at least a 30% share of the property
have your legal domicile registered at the property
have a loan secured by a mortgage on the property
Purchasing Your First Home
A similar scheme is available for first-time home buyers. Different rules apply to that scheme.
In general, private pension savings (supplementary pension savings) are intended to build up savings for retirement. Once an employee has set up private pension savings, a supplementary contribution is automatically paid into their private pension fund each time they receive their salary, and the employer also makes an additional contribution.
Application
Apply through the Iceland Revenue and Customs service website. You need to select the private pension fund from which the contributions will be paid and the mortgage to which they will be applied.
Spouses and cohabiting partners must each submit a separate application.
Validity and Processing
Applications apply to contributions paid after the application is submitted.
It may take 1–3 months for the first payments to be applied to the mortgage. (for the period from the date the application was approved).
The scheme can be used for a maximum of 10 years (or the equivalent of 120 months).
An exception applies to applications submitted before 1 December 2026. These applications will cover monthly contributions for the entire year, from 1 January 2026.
If you have previously used private pension savings under other schemes, that period will be deducted from the 10-year limit. The calculation takes into account both the length of time you used the schemes and the maximum amount allowed for each year.
During the application process, you can see how many months you have left of the 10-year period.
Maximum Annual Amount
In 2026, you can apply up to 500,000 ISK to your mortgage, based on contributions made over 12 months. The amount is adjusted at the beginning of each year in line with the Consumer Price Index.
The maximum amount is divided as follows:
Your contribution can be up to 4% of your salary, with a maximum of 333,000 ISK per year.
Your employer’s contribution can be up to 2% of your salary, with a maximum of 167,000 ISK per year.
Your employer’s contribution cannot be higher than your own contribution.
If more is paid from your private pension fund than the rules allow, the excess amount will be taxed as income. This can happen, for example, if your employer contributes more than 2% of your annual salary.
Maximum Period – How Are the Months Counted?
You can apply private pension savings to your mortgage for a total of 10 years, or 120 months. If you use the maximum annual amount, this counts as 12 months, regardless of how many payments are made during the year.
Examples
Person A applies private pension savings to their mortgage every month for one year without exceeding the maximum annual amount. At the end of the year, they have used 12 months and have 108 months (9 years)
remaining.
Person B reaches the maximum annual amount through payments made over 5 months. The maximum annual amount counts as 12 months of use, leaving 108 months (9 years) remaining.
Couple C used the maximum annual amount of 750,000 ISK under a previous scheme (through Leiðrétting.is). This counts as 12 months of use for each spouse, leaving each of them with 108 months (9 years)
remaining.
Breytingar á umsókn
Service provider
Skatturinn - Iceland Revenue and Customs