A linear mortgage is one of the most popular types in the Netherlands. With this mortgage, you repay a fixed amount of the loan every month. On top of this amount, you pay interest. Every month, as your debt decreases, so does the interest you pay.

A linear mortgage is predictable and provides a linear decrease in your monthly costs over the coming years.

How does a linear mortgage work?

The linear mortgage consists of two parts:

• Fixed repayment.
• Interest.

Fixed repayment

Your total loan is divided over all the months in the term. Every month, you pay the same amount of the loan back.

Example:

• You have a loan of €200,000 and a term of 30 years (360 months).
• Your montlhy repayment: €200,000 ÷ 360 = around €555.

Interest

The interest is calculated on the outstanding amount you still owe. Your debt decreases every month, which means the interest payments also decrease.

• Faster repayment.
• Lower total interest costs.
• Decreasing monthly payments.
• More certainty about reducing your debt.

Faster repayment

You pay off your debt faster compared to an annuity mortgage. You repay the same fixed amount every month instead of mainly paying interest at first.

Lower total interest costs

Since your debt decreases faster, you pay less interest overall during the term.

Decreasing monthly payments

The linear mortgage starts with higher monthly costs, but your payments go down steadily. You will have more financial room over time.

More certainty about reducing your debt

You can clearly see how your loan drops each month.

What are the disadvantages of a linear mortgage?

• Higher initial payments.
• Less popular among first-time buyers.

Higher initial payments

You pay a fixed repayment plus interest on the full loan amount. At first, your monthly payments will be pretty high.

Less popular among first-time buyers

Because the initial payments are so high, many first-time buyers are unable to choose this type of mortgage.

This mortgage is suitable for people who:

• Have enough income to handle higher costs in the beginning.
• Want to reduce their total debt more quickly.
• Expect their income to decrease in the future. For example, you want to work less, or you are going to retire soon.

Tax and mortgage interest deduction

With a linear mortgage, you are eligible for a mortgage interest deduction. To qualify, you must use the mortgage to:

• Buy a house.
• Maintain a house.
• Improve a house.

You can then deduct the interest from your taxable income. The result? Lower net monthly costs.