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Program for First-Time Homebuyers Introduced

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Program for First-Time Homebuyers Introduced

 Bjarni Benediktsson and Sigurður Ingi Jóhannsson

Prime Minister Sigurður Ingi Jóhannsson and Finance Minister Bjarni Benediktsson. Archive photo. Photo: Páll Stefánsson.

Yesterday, Prime Minister Sigurður Ingi Jóhannsson and Finance Minister Bjarni Benediktsson introduced a new program called First Home, meant to make it easier for young people to purchase their first home, RÚV reports.

The program was presented as a draft resolution when Alþingi, the Icelandic parliament, reconvened yesterday. Sigurður Ingi hopes it gets the support of members of parliament and will be signed into law next year.

The program is meant to take effect July 1 next year. It’s intended for people who take advantage of a so-called private pension fund, where employees can opt to set aside about 2 percent of their earnings to be matched by their employers.

Another draft resolution would limit the term of indexed annuity loans to 25 years. Still, exceptions will be made to young people and low-income people, as well as those who take a mortgage with a low loan-to-value ratio.

Before last elections, the Progressive Party had declared its intention to do away with indexed loans, Vísir reports, but this program falls short of that goal. “This is the compromise of two parties,” stated MP Frosti Sigurjónsson, who represents the Progressive Party, indicating that the Independence Party would not accept doing away with indexed loans.

First home owners can take advantage of the new program for ten years. The proposed program offers first-time homebuyers three options:

1. The tax-exempt private pension fund can be accumulated for ten years as part of a down-payment. (The maximum amount per person which can be used this way is ISK 500,000 (USD 4,250, EUR 3770) a year.)
2. The tax-exempt private pension fund can be used to pay down the principal every month for ten years.
3. A combination of the two options above, whereby the tax-exempt private pension fund can be applied toward the principal of a non-indexed loan and used to reduce monthly mortgage payments.

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