Living in Iceland · Property

Buying property

Buying a home in Iceland comes down to two questions most new arrivals do not know to ask: are you allowed to buy at all, and which kind of loan are you signing? Both are decided long before you get the keys.

Buying property as a foreigner

When you can buy freely, and when you need special permission.

Last verified 4 August 2026 · Lög nr. 19/1966 um eignarrétt og afnotarétt fasteigna; stjornarradid.is

If you are a citizen of the EEA, the EU or EFTA

What actually happens: You have the right to buy a home in Iceland, to live in or for your business. For this, the law treats you like an Icelandic buyer.
What to do: Go ahead as any buyer would: ask a bank how much they will lend you, view homes, make your offer through a licensed estate agent (fasteignasali, say: FAST-ayg-na-sal-i), and sign the purchase contract (kaupsamningur, say: KOIP-sam-nin-gur).

If you are from outside the EEA

What actually happens: You can buy freely only if you have a permanent residence permit or you are married to an Icelandic citizen. If you only have a temporary work or residence permit, you must first ask the Ministry of Justice for special permission, before you sign anything.
What to do: Ask for that permission before you promise to buy a home. The application goes to the Ministry of Justice (Dómsmálaráðuneytið, say: DOHMS-mowl-a-rah-thu-nay-tith) and says who you are, where you live, and why you want to own a home. A property lawyer can write it for a fixed price.
The common trap: Signing the purchase contract first and asking for permission after. If they say no at that point, you may still owe the seller.

Home loans (Húsnæðislán)

Húsnæðislán (say: HOOS-nye-this-lown) means a home loan. There are two kinds in Iceland, and choosing the wrong one can change a great deal how much you pay in the end.

Last verified 4 August 2026 · Central Bank of Iceland (sedlabanki.is); Consumer Agency (neytendastofa.is)

Loans that do not follow prices (óverðtryggt)

What actually happens: These work like normal home loans in other countries. What you pay each month depends on the interest rate. If interest rates go up, your monthly payment goes up straight away, and sometimes by a lot. But what you still owe gets smaller every month as you pay.
What to do: Before you sign, ask the bank what the payment would be if the interest rate were higher, not only at today's rate. Ask them to show you the payment if rates went up by 2 or 3 points. If that number breaks your household budget, the loan is too big.

Loans that follow prices (verðtryggt)

What actually happens: The monthly payment looks small and easy at the start. That feels good. But this loan is tied to prices in the shops. When food, fuel and rent get more expensive in Iceland (this is called inflation), the bank quietly adds that extra cost to what you still owe. So you can pay the bank every month, on time, for years, then look at your balance one day and see that you owe more than they first gave you. You did nothing wrong. The loan grew in the background while you were paying it.
What to do: Before you sign one of these, ask the bank to show you, year by year, how much you would still owe if prices rise at a normal rate. Be sure you understand that what you owe and what you pay each month are two different numbers.
The common trap: Choosing this kind only because the monthly payment is smaller. The small payment is real, and so is the quiet growth of the debt.

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