Different Kind of Mortgages

What kind of mortgages do we have here in the Netherlands?

In the Netherlands there are essentially two mortgages you can choose from, the annuity mortgage and the linear mortgage.

Both these mortgages consist of principal and interest. In both cases, you pay back the mortgage in 30 years or sooner if you want.

Dutch taxes support these mortgages, you get about 37% of your interest back from the government if you also pay your taxes here in the Netherlands.

We used to have an interest-only mortgage which was very popular with a lot of Dutch people because you only pay interest and the monthly costs were low. However, the mortgage did not get paid off automatically like with the annuity and linear mortgages. The Dutch government saw these mortgages as a risk and decided not to support them anymore with tax reduction which is why for most first-time buyers this mortgage has become less attractive.

It does still exist but does not get chosen a lot.

The difference between an annuity mortgage and a linear is the principal element. With the annuity mortgage, you pay a fixed amount a month that consists of principal and interest. In the beginning, the interest part is the largest and during the years the interest part will become less and the principal part will become more but the gross amount a month stays the same.

With a linear mortgage, the total monthly amount starts at a higher amount than with the annuity mortgage. The principal part you pay within the monthly costs is always the same. You divide the total mortgage into 360 months and that is the principal part. The other part is interest which becomes lower every month. The monthly total amount you pay is in the beginning a lot more than with the annuity mortgage but in 30 years you pay less interest to the bank with the linear mortgage.