In The Netherlands there are different types of Dutch Mortgages. The most common ones are the annuities mortgage (annuïteitenhypotheek) and the linear mortgage (linear hypotheek). Only these two kinds of mortgages are eligible for the interest tax deduction* (renteaftrek).
With an annuities mortgage (annuiteiten hypotheek) you will pay the same amount over the whole period of the mortgage. In the beginning, this will mainly consist of in-terest and only a small part of the loan. Gradually this changes so that at the end of the mortgage you will mainly repay your loan. With an annuities mortgage you usually have lower monthly payments in the early years of the mortgage period than a linear mortgage. The high amount of interest can be deducted on taxes, which makes your net monthly cost low in the beginning of the mortgage. The downside of an annuities mortgage is that you will pay more interest compared to a linear mortgage.
With linear Dutch mortgages (lineaire hypotheek) is the amount of debt that you repay the same every month. On top of the debt you will also pay interest, which will be the highest in the beginning of the mortgage as there is not a lot of loan that is paid back yet. Your debt is reduced every month which also reduces the interest. At the beginning of a linear mortgage the costs are high, but they will gradually decrease. With a linear mortgage you can pay off your mortgage as quickly as possible. Another advantage of a linear mortgage is that you pay less debt compared to an annuities mortgage. The downside of this mortgage is that you pay a high amount in the beginning of the mortgage.
*If you have a different type of mortgage before 2013, e.g. an interest-only mortgage, then you’re entitled to use that kind of mortgage again and still be eligible for interest tax deduction. Please contact us for advice on this theme.
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