Annuity vs Linear Mortgage in the Netherlands

Annuity vs linear mortgage: which one should you choose?

In the Netherlands, there are two main mortgage repayment types: the annuity mortgage (annuiteitenhypotheek) and the linear mortgage (lineaire hypotheek). Both are eligible for the mortgage interest deduction (hypotheekrenteaftrek), but they differ significantly in how your monthly payments are structured.

Use the calculator below to compare both options for your specific situation:

How an annuity mortgage works

The annuity mortgage is by far the most popular choice in the Netherlands. With this type, you pay a fixed gross monthly amount throughout the entire mortgage term.

Here is the key: while the total monthly payment stays the same, the composition changes over time. In the early years, a large portion goes toward interest and only a small part toward actual repayment. As the years progress, this gradually shifts - you pay less interest and repay more of the principal.

Example with a EUR 300,000 mortgage at 4% interest:

• Month 1: roughly EUR 1,000 in interest and EUR 432 in repayment
• Month 180 (year 15): roughly EUR 700 in interest and EUR 732 in repayment
• Month 360 (year 30): roughly EUR 50 in interest and EUR 1,382 in repayment

The gross monthly payment stays around EUR 1,432 throughout, but your net payment changes because of the mortgage interest deduction.

How a linear mortgage works

With a linear mortgage, you repay a fixed amount of the principal every month. Since the outstanding debt decreases steadily, the interest you pay also decreases every month. This means your total monthly payment starts high and gradually drops over the life of the mortgage.

Example with a EUR 300,000 mortgage at 4% interest:

• Month 1: EUR 833 repayment + EUR 1,000 interest = EUR 1,833 total
• Month 180 (year 15): EUR 833 repayment + EUR 583 interest = EUR 1,416 total
• Month 360 (year 30): EUR 833 repayment + EUR 3 interest = EUR 836 total

The repayment amount (EUR 833) stays the same, but total costs drop significantly over time.

Comparing the two: pros and cons

Annuity mortgage

Advantages:

• Lower initial monthly payments, giving you more room in your budget when you first buy
• Higher mortgage interest deduction in the early years (since you pay more interest)
• Predictable gross monthly payments - easier to budget
• Most lenders allow you to borrow slightly more with an annuity mortgage

Disadvantages:

• You pay more total interest over the full 30-year term
• You build equity more slowly in the early years
• Net monthly payments actually increase over time as the interest deduction decreases

Linear mortgage

Advantages:

• Lower total interest costs over the full mortgage term (typically 10% to 15% less than annuity)
• You build equity faster, which is useful if you plan to sell or refinance
• Your monthly payments decrease over time, giving you more spending room later in life
• You are "underwater" (owing more than the home is worth) for a shorter period

Disadvantages:

• Higher initial monthly payments, which means you may qualify for a smaller mortgage
• Less budget room in the first years when you might need it most (furnishing, renovations)
• The financial advantage only becomes clear after many years

Which is better for expats?

The right choice depends on your personal situation. Here are some things to consider:

Choose annuity if:

• You want the maximum borrowing capacity to compete in the Dutch housing market
• Your income is likely to grow over the coming years (common for expats early in their career)
• You prefer stable, predictable monthly payments while settling into a new country
• You want maximum mortgage interest deduction in the early years
• You have the 30% ruling - the higher interest deduction in early years pairs well with your current tax benefit

Choose linear if:

• You have a comfortable income and can handle higher payments from the start
• You plan to stay in the Netherlands long-term and want to minimize total costs
• You value building equity quickly, for example if you might sell after 10 to 15 years
• You expect your income to stay stable or decrease (for example, nearing retirement)
• You are financially conservative and prefer to reduce debt as fast as possible

The impact of mortgage interest deduction

The hypotheekrenteaftrek (mortgage interest deduction) plays an important role in this comparison. In 2025, you can deduct mortgage interest at a rate of 37.48% from your taxable income.

With an annuity mortgage, you pay more interest in the early years, so your tax benefit is higher at the start. With a linear mortgage, your interest deduction decreases faster because you are paying down the principal more quickly.

However, do not choose a mortgage type purely for the tax benefit. The deduction is nice, but you are still paying interest to a bank. The linear mortgage saves you money on total interest, even after accounting for the smaller tax deduction.

If you have the 30% ruling, your effective tax rate is already lower, which reduces the value of the mortgage interest deduction somewhat. Once the 30% ruling expires, the deduction becomes relatively more valuable since you will be paying more tax.

Can you combine both types?

Yes, it is possible to split your mortgage into two parts: one annuity and one linear. This is called a combination mortgage (combinatiehypotheek). For example, you could take 60% as annuity and 40% as linear, balancing affordability with faster equity building.

This approach can make sense if:

• You want lower payments than a full linear mortgage but faster repayment than full annuity
• You want to hedge your bets between the two options
• Your mortgage advisor recommends it based on your specific financial situation

What about an interest-only mortgage?

You might hear about the interest-only mortgage (aflossingsvrije hypotheek). With this type, you only pay interest and never repay the principal. While these still exist in the Netherlands, new interest-only mortgages are no longer eligible for mortgage interest deduction since 2013. They are also limited to 50% of the property value.

For most expats buying their first home, an interest-only mortgage is not a practical option and is generally not recommended.

Making your decision

The difference in total cost between annuity and linear over 30 years can be tens of thousands of euros in favor of linear. But the annuity mortgage gives you more breathing room at the start, which many expats value when they are still getting settled.

A mortgage advisor (hypotheekadviseur) can run both scenarios with your exact numbers and help you decide. Many advisors offer a free introductory call, so you can explore your options before committing.

Compare mortgage advisors in your area