Equity loans
What is an equity loan?
Equity loans are a way to enter the real estate market for those individuals who are able to pay monthly instalments on housing loans but don’t have, or have difficulty saving up for, a full down payment on a property.
Unlike other loans, equity loans have no monthly instalments or interest, instead you pay the loan in full 10-25 years later or when you sell the property.
To qualify for an equity loan, you need:
to be buying a property for the first time or not have owned a property for the last 5 years.
to have income below a certain limit.
to have personal funds for a 5% down payment.
to be buying a property approved by HMS.
The payment burden ratio must complies with the condition of Central Bank of Iceland
Less personal funds
You only need to own sufficient funds for a 5% down payment.
You will receive an equity loan for up to 20% of the property price.
You take out a housing loan for the rest.
Your down payment can be up to 6,5% but then the equity loan will decrease accordingly.
Example:
You have a 10% down payment.
The equity loan can be up to 16,5%.
How is an equity loan repaid?
There is no interest or instalments on equity loans. Instead, the loan amount follows the development of the property price, and you will not have to repay the loan until you sell the property or at the end of the loan term. An equity loan has a 10 year loan term, but the loan term can be extended by 5 years at a time, for a total of 25 years in consultation with HMS loan advisers.
Down payments on an equity loan
If you want to make a down payment on an equity loan, the payment must be at least 5% of the price of the property. You need to get an appraisal from a real estate agent and then contact HMS by email hlutdeildarlan@hms.is or phone 440 6400, asking to make a down payment on the loan. The loan is then recalculated and you will receive a claim to your internet bank for the amount
Refinancing of a base loan
You can increase the amount of your base loan by refinancing, in order to make a down payment on the equity loan.
Service provider
Housing & Construction Authority