Mortgage term vs. fixed-rate period in the Netherlands

Your mortgage term is how long you have to repay the loan (usually 30 years), while your fixed-rate period is how long your interest rate stays locked (you choose, for example, 5, 10 or 20 years). They're easy to confuse, but they answer two different questions: how long until the loan is paid off and how long is today's interest rate guaranteed. Getting the fixed-rate period right is one of the most important choices you'll make, so let's break it down.

What is the mortgage term?

The term of your mortgage is the period of your loan. When you take out the mortgage you agree to repay the borrowed amount within this period. For Dutch mortgages this is usually 30 years (360 months). The term, together with your mortgage type, determines how your repayments are spread out over time.

On an annuity or linear mortgage you repay a bit of principal every month alongside the interest. As the outstanding balance shrinks, the interest portion of each payment falls too, while the principal portion grows.

What is the fixed-rate period?

When you take out a mortgage you choose a fixed-rate period (rentevaste periode) — commonly anything from 1 to 30 years. During that period your interest rate stays the same, locked in by contract with the lender, no matter what happens to market rates.

As a rule, the longer the fixed-rate period, the higher the rate. That's because the lender takes on more risk by guaranteeing your rate for longer: if market rates rise, they're stuck offering you the old, lower rate. In exchange, you get certainty. If you expect rates to fall, a shorter fixed-rate period can be attractive, because when it ends you can lock in a new — possibly lower — rate.

The difference between term and fixed-rate period

People often mix these two up. In Dutch they're sometimes called the juridische looptijd (legal term) and the economische looptijd (economic term):

• The fixed-rate period is how long your interest rate is guaranteed (e.g. 5, 10 or 20 years).
• The mortgage term is the total length of the loan — usually 30 years — within which the entire borrowed amount plus interest must be repaid.

So a 30-year mortgage might contain several consecutive fixed-rate periods. Each time one ends, you renegotiate the rate for the next stretch.

Why choose a 10-year fixed rate or longer?

When interest rates are low, many people fix their rate for 10 years or more. The main benefit is security: you know exactly what you'll pay for years to come, and a rise in market rates won't affect you during that period. The trade-off is that a longer fixed-rate period usually comes with a slightly higher starting rate.

How to choose your fixed-rate period

A shorter fixed-rate period generally means a lower interest rate, but more risk. If rates rise sharply, you'll feel it as soon as your period ends and you have to lock in a new, higher rate. A longer period costs a little more now but shields you from that risk.

Beyond the headline rate, two factors are worth weighing.

Your mortgage amount

If your mortgage is large relative to your income, a short fixed-rate period is riskier. A rate rise after your period ends would push up your monthly payments at a point where you have less room to absorb it. In that case, the certainty of a longer fixed-rate period is often worth the small premium.

Expected interest rate developments

If you expect rates to fall in the coming years, a shorter fixed-rate period lets you re-fix at a lower rate sooner. If you expect rates to rise, a longer fixed-rate period locks in today's rate and gives you more security.

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