Real estate agent fee
Agent commission ranges from 1% to 2.5% of the sale price. In most residential transactions, the seller pays the agent fee, but confirm this before signing. If you engage your own buyer's agent, that fee is separate.
Legal fees
If you hire a lawyer for contract review and due diligence, expect to pay 150,000 to 400,000 ISK depending on the complexity of the transaction.
Property condition inspection
A professional property inspection (ástandsskoðun) costs roughly 50,000 to 100,000 ISK. This is optional but recommended, especially for older properties.
Total transaction costs
For an individual buyer, total costs beyond the purchase price typically run between 1% and 3% of the property value, depending on whether you are a first-time buyer and whether you hire a lawyer and inspector.
Mortgage options in Iceland
Iceland's mortgage market has features that differ significantly from most other countries, particularly the indexed loan system.
The three main banks
Iceland's three commercial banks, Landsbankinn, Íslandsbanki, and Arion Bank, all offer mortgage products. Interest rates and terms vary, so getting quotes from all three is standard practice.
Indexed loans (verðtryggð lán)
Indexed loans are tied to the Icelandic Consumer Price Index (CPI). The principal balance adjusts monthly with inflation, meaning if inflation rises, your loan balance grows. In exchange, the nominal interest rate is lower than non-indexed loans. As of early 2025, indexed rates from the major banks ranged from roughly 4.5% to 6.5%, though these shift with central bank policy. Terms run up to 30 years.
This is Iceland's traditional mortgage type and still widely used. The advantage is lower monthly payments in the early years. The risk is that high inflation periods can significantly increase what you owe in total.
Non-indexed loans (óverðtryggð lán)
Non-indexed loans carry a fixed interest rate for a set period (typically 3 to 5 years), after which the rate resets. The principal is not affected by inflation, so you always know exactly what you owe. Nominal interest rates are higher than indexed loans to compensate. As of early 2025, non-indexed fixed rates from the major banks ranged from roughly 8% to 10%, depending on the fixed period and lender. Terms run up to 40 years.
These loans have grown in popularity as borrowers seek predictability. They work particularly well when inflation is high, since your balance stays constant.
HMS loans
The Housing and Construction Authority (Húsnæðis- og mannvirkjastofnun, HMS) provides government-backed mortgages. For first-time buyers, HMS offers up to 85% loan-to-value (LTV), consisting of a 70% base loan plus a 15% supplementary loan. The maximum property value for HMS eligibility is 73,000,000 ISK, and the maximum total loan amount is 44,000,000 ISK (as of March 2026).
For non-first-time buyers, HMS loans cover up to 80% LTV.
How much can you borrow
Monthly mortgage payments must not exceed 35% of your net monthly income. For first-time buyers, this limit is raised to 40%. Banks assess your total debt obligations, not just the new mortgage, so existing loans and credit card balances count against your capacity.
For foreign buyers with income in a currency other than ISK, banks apply stricter creditworthiness requirements and may offer a foreign-currency-indexed mortgage, where the loan is denominated in ISK but indexed to your income currency.
Deposit requirements
The standard down payment is 20% of the purchase price (80% LTV maximum). First-time buyers can access up to 85% LTV through HMS, meaning a 15% down payment. Some banks offer up to 90% LTV for first-time buyers by combining an HMS loan with a supplementary bank loan, but this requires a strong credit profile.
Taxes on property ownership
Annual property tax (fasteignaskattur)
Property tax in Iceland is levied by municipalities, not the central government. Rates vary by municipality and property type. For residential property (category A), rates range from 0.18% to 0.625% of the official property valuation. Reykjavik charges 0.18% for category A residential property (as of 2025).
The official valuation (fasteignamat) is set by Registers Iceland (Þjóðskrá) and updated annually. It is typically lower than market value, so the effective tax burden is modest compared to many countries.
Capital gains tax
If you sell a property at a profit, the gain is taxed as investment income at 22%.
There is a significant exemption for primary residences. If you have owned and lived in the property as your primary home for at least two years, the gain is tax-free. If you have owned it for less than two years, you can defer the tax by applying the gain toward the purchase price of another residence within two years.
For more on how investment income and tax residency work, see our guide to Iceland's tax system.
Property prices in Iceland
Residential property prices vary significantly by location. In the capital region (Reykjavik and surrounding municipalities), the average purchase price across all housing types was approximately 87,000,000 ISK (around $620,000) as of January 2025. Apartments averaged around 76,000,000 ISK, while detached houses averaged closer to 145,000,000 ISK.
Per square metre, expect roughly the following in the capital area (as of late 2024/early 2025):
Prices rose by roughly 11% year-on-year in the capital region as of early 2025, though growth has shown signs of moderating since mid-2025. Outside Reykjavik, prices are substantially lower, but the market is also less liquid. See our guide to where to live in Iceland for a breakdown of regions.
Practical tips for foreign buyers
Get your kennitala first. You cannot sign a purchase agreement, open a bank account, or apply for a mortgage without a kennitala. If you do not have one yet, apply at Registers Iceland as soon as you arrive. Our first 30 days checklist covers this step.
Budget for indexed loan risk. If you choose an indexed mortgage, model scenarios where inflation runs at 5%, 7%, and 10%. Your loan balance will grow in those years. Make sure you can handle the worst case.
Understand the valuation gap. The official fasteignamat (used for stamp duty and property tax) is often lower than the actual market price you pay. This means your stamp duty will be lower than you might expect, but the tax valuation also determines your property tax, which may rise as valuations catch up.
Check the building condition report. Iceland's climate is harsh on buildings. Moisture damage, concrete issues, and geothermal heating system problems are common in older properties. Always review the most recent condition report, and consider commissioning your own inspection.
Join the housing association. Most apartment buildings in Iceland are managed by a húsfélag (housing association). Before buying, ask to see the association's meeting minutes and financial statements. Upcoming maintenance projects (roof repairs, pipe replacements) can result in significant special assessments.
Language barrier matters here. Purchase agreements, loan documents, and land registry records are all in Icelandic. Even if you speak some Icelandic, have a bilingual lawyer or advisor review the legal documents.
Frequently asked questions
Can non-EEA citizens buy property in Iceland?
Yes, if they are legally domiciled in Iceland (holding a valid residence permit and registered address), they can buy on the same terms as Icelandic citizens. Non-domiciled non-EEA nationals need permission from the Ministry of Justice, which is granted only under specific conditions.
How much deposit do I need to buy a home in Iceland?
The standard requirement is 20% of the purchase price. First-time buyers can access government-backed HMS loans that require as little as 15% down. Some combined bank and HMS arrangements allow up to 90% LTV in certain cases.
What is an indexed mortgage, and should I get one?
An indexed mortgage ties your loan balance to Iceland's Consumer Price Index. When inflation rises, your balance grows. The benefit is a lower interest rate compared to non-indexed loans. Whether to choose indexed or non-indexed depends on your risk tolerance and how long you plan to stay. Many buyers split their mortgage between both types to balance the risk.
How much is stamp duty when buying property in Iceland?
Stamp duty for individuals is 0.8% of the official property valuation. First-time buyers pay half: 0.4%. Legal entities pay 1.6%.
Do I need a lawyer to buy property in Iceland?
It is not legally required, but strongly recommended for foreign buyers. A lawyer can review the purchase agreement, verify the title, check for encumbrances, and ensure the transaction protects your interests. Expect to pay 150,000 to 400,000 ISK for legal services.
Is there capital gains tax when selling property in Iceland?
Gains from property sales are taxed at 22%. However, if the property was your primary residence and you owned it for at least two years, the gain is completely tax-free.
Last updated: March 2026
