So you plan to buy a house in the Netherlands and perhaps you have already started looking. Here are some things to think about when deciding what sort of mortgage to take out.

Once you’ve had a chat with a mortgage adviser and determined your budget, you should also start thinking about which type of mortgage would suit you best.

There are lots of different sorts of mortgage in the Netherlands, but only annuity and linear mortgages are eligible for tax relief – a benefit for homeowners which allows you to deduct the interest payments you make on the loan from your income tax bill.

Both an annuity and a linear mortgage can run for up to 30 years. Every annuity and linear mortgage payment includes two parts: repayment of the loan and interest. The difference between the two lies in how you repay your mortgage each month.

Paying off the loan

“Take a mortgage of €500,000, an interest rate of 4% and a duration of 30 years,” says ABN AMRO mortgage advisor Steven Goedeman in the video below. “With an annuity mortgage, you pay the same amount every month — in this case €2,387. In the beginning, a large part of this payment is interest, and a smaller part goes towards paying off the principal loan.

“Over time, the interest part decreases and the repayment portion increases. And as long as the interest rate is fixed, the total monthly amount stays the same. That makes an annuity mortgage predictable, so you always know how much you have to pay.”

With a linear mortgage, however, you repay the same amount of the loan each month (€1,394), plus interest on the remaining loan. Because the loan gets smaller with each repayment, you pay less interest over time — meaning your total monthly payment decreases. In this case, you would start by paying €3,056 a month and end on €1,394. You repay more upfront, so you pay less interest overall.

“In short: an annuity mortgage gives peace of mind with fixed costs, while a linear mortgage saves money in the long run,” says Steven.
Which is best for you depends on your situation, so this is something to talk to a mortgage advisor about. At the same time, you can discuss how long you want to fix the interest rate for and all the other options open to you.

If you are considering buying a home, feel free to reach out to Steven or one of his ABN AMRO colleagues for a free consultation.  Find out more