Using Private Pension Savings to Pay Down a Mortgage

You must:

• Be the registered owner of at least a 30% share of the property.

• Have taken out the loan to purchase the residential property, with the loan secured by a mortgage on the property.

• Have your legal domicile registered at the property.

In addition, you must not have fully used the 10-year entitlement available under previous private pension savings schemes.

On the application homepage, you can see how many months you have left of your entitlement.

The two schemes have different eligibility requirements. Both allow you to use private pension savings to make payments towards your mortgage. However, under the First Home Scheme, you can also apply to have your accumulated contributions paid into your bank account when purchasing a property.

Learn more about using private pension savings to buy your first home.

You can use the scheme for a total of up to 10 years, or 120 months.

The following is deducted from this period:

• Any period you have previously used under other private pension savings schemes.

• If you reached the maximum annual amount in fewer than 12 months, this counts as 12 months of use.

If your spouse has previously used a joint entitlement through Leiðrétting.is, this also counts towards your period of use.

If you use all 12 months of your entitlement in a year, you are considered to have used one full year of the scheme, even if you do not reach the annual maximum amount.

No. The contributions can only be applied to the principal of a residential mortgage.

Once Iceland Revenue and Customs has approved the application, it is processed by the lender and the private pension fund, which arrange for the payments to be applied to the mortgage.

If all the information in the application is correct and you are making regular contributions to a private pension fund, it may take 1–4 months for the first payment to be applied to your mortgage after approval by Iceland Revenue and Customs.

After that, payments are generally applied to the mortgage every 1–4 months, depending on how often your private pension fund transfers payments to the lender.

Payments are not always made every month. How often contributions are transferred to the lender varies between private pension funds.

The private pension fund must transfer payments to the lender at least four times a year. The lender then applies the payments to the mortgage.

No, you cannot apply your private pension savings to your spouse’s mortgage.

To qualify, you must:

• be the registered owner of at least a 30% share of the property.

• be named as a borrower on the mortgage agreement.

• have your legal domicile registered at the property.

No, there is no application deadline. Your application takes effect from the month in which you apply.

However, applications submitted before 1 December 2026 take effect from January 2026.

Please note that an application deadline does apply to when applying as a first time home buyer.

Yes. Payments from a private pension fund that are applied to a residential mortgage through the Iceland Revenue and Customs scheme are tax-free.

Please note that if the amount exceeds the annual maximum, tax must be paid on the amount above the limit.

No. You cannot apply to withdraw funds from your private pension savings. You can only apply to have monthly contributions applied to a residential mortgage.

Withdrawals are only available to applicants using private pension savings to purchase their first home.

Yes. If your spouse used your joint entitlement through Leiðrétting.is, this reduces the period available to you under this scheme.

No. Private pension savings cannot be applied to a loan taken out to purchase a right of occupancy.

I have changed my legal domicile, but the change has not yet been updated in the application.

If your application was rejected because of your registered legal domicile and the property is your home for your own use, you can apply again.

First, you need to register your legal domicile at the property with Registers Iceland. It may take a few days for the change to be updated. Once it has been updated, you can submit a new application.

If you believe the decision is incorrect, you can request that your application be reconsidered by email.

Contact Iceland Revenue and Customs

Clearly explain what you believe is incorrect in the decision and provide any additional supporting documents if necessary.