We recommend that parties come to us before starting out and committing to planned construction projects. Construction financing is more complex than standard residential mortgage applications, and the equity requirement is stricter.
We offer house builders comprehensive financing for construction projects, from land purchase until the property is fully built. Up to the weathertight stage, an unindexed short-term loan is provided, but at construction stage 2 (weathertight building), the property becomes eligible for mortgage loans, and subsequently in phases as the construction stage increases. A mortgage is taken on the property in the form of a security deed.
When a property is fully built and has reached construction stage 4, a loan of up to 80% of the construction cost or market value can be obtained, whichever is lower. Loans are only granted at first mortgage priority. Each application is reviewed individually before it is approved. If the loan amount exceeds 70 million ISK, additional requirements apply.
Before getting started, it is a good idea to assess your situation by going through a payment assessment. If you are interested in learning more, you can send us a message at ibudalan@arionbanki.is or book an appointment with an advisor.
A cost and work plan must be in place
Initial equity must be 30% of the estimated construction cost
The maximum loan-to-value ratio of the project is up to 70% of construction draws at any given time
Fire insurance for properties under construction/construction insurance must be in place
The loan is provided in the form of an overdraft for a maximum of 12 months at a time, which is then extended as needed
The loan carries non-indexed variable interest rates on a dedicated account
The loan can be repaid at any time without cost
Provides comprehensive and complete protection for those who have houses under construction and have hired a construction manager and/or responsible contractors to handle the construction work.
Choosing the right mortgage is a major decision that affects your household finances for many years. Therefore, it's important to understand how the choice of loan term and type can change both the payment burden and total cost. Whether the loan is indexed or non-indexed, and how long the loan term is, can have significant effects on payment burden and equity building.
After checking your payment capacity and securing a down payment, it's time to find your dream property. This process can take varying amounts of time, but it's important to choose carefully and find a property that has most of the features you're looking for.
Most people have very clear ideas about what kind of apartment they're looking for and what requirements it needs to meet, but it's good to keep in mind that you may not find an apartment that fulfills all your wishes. When buying your first property, you often need to prioritize features and choose the property that checks the most boxes if you can't find one at the right price that meets all your criteria.
When taking out a new loan, the repayment period can be crucial. The maximum loan term varies, but the longest loans are for real estate purchases, which can extend up to 40 years.
It is difficult to determine whether renting or buying is right for you, and this is mainly guided by your financial situation and financial goals. You should calculate both options thoroughly before making a decision. If you are considering purchasing property, there are several important factors you should familiarize yourself with and be clear about before you begin the process.