Choosing between an annuity vs linear mortgage is one of the first decisions you make when buying a home in the Netherlands.
Both options (annuiteitenhypotheek and lineaire hypotheek) repay your loan in full over the term, and both qualify for mortgage interest deduction.
The difference is in how your monthly payments are shaped, and that has a real effect on your budget.
How an Annuity Mortgage Works
With an annuity mortgage, your total gross monthly payment stays the same throughout the fixed-rate period. In the early years, most of that payment is interest and only a small part is repayment. Over time the balance shifts, so you pay less interest and more towards the loan itself.
Because the payments start lower, this is the most popular choice in the Netherlands, especially for first-time buyers.
How a Linear Mortgage Works
With a linear mortgage, you repay the same fixed amount of the loan every month, plus interest on whatever is still outstanding. Since the outstanding balance falls steadily, your interest cost and your total monthly payment start higher and then decrease month by month.
You pay the loan down faster in the early years and pay less interest overall.
The Trade-off in Plain Terms
An annuity mortgage gives you lower payments now and higher payments later. A linear mortgage gives you higher payments now and lower payments later. Over the full term, a linear mortgage usually costs less in total interest, but it asks more of your budget at the start.
Which One Suits You?
- Choose annuity if you want lower, predictable monthly costs at the start. This suits many expats early in their career or stretching to buy in an expensive market
- Choose linear if you can comfortably afford higher payments now, want to build equity faster, and prefer to pay less interest overall
A Note on Tax for Expats
Both annuity and linear mortgages qualify for the Dutch mortgage interest deduction (hypotheekrenteaftrek), because both fully repay the loan within 30 years. With an annuity you have more interest, and therefore more deduction, in the early years. With a linear mortgage the deductible interest falls faster.
The deduction rate changes over time, so it is worth confirming the current rate with a mortgage advisor before you decide.
FAQ – Annuity vs Linear Mortgages
Which mortgage type is most common in the Netherlands?
The annuity mortgage is the most common, mainly because its monthly payments start lower than a linear mortgage.
Which costs less in total, annuity or linear?
A linear mortgage usually costs less in total interest, because you pay the balance down faster. The trade-off is higher payments in the early years.
Do both types qualify for mortgage interest deduction?
Yes. Both repay the loan in full within 30 years, which is the condition for the deduction on new mortgages.
Not Sure Which to Choose?
If you would like help comparing annuity and linear against your own numbers, we are happy to talk it through.
