In the Netherlands, there are multiple types of mortgages. The most common mortgages are linear and annuity mortgages. In this blogpost, we will explain what linear mortgages entail, and why they are a financially appealing choice.
What is a linear mortgage?
With linear mortgages, you have a fixed principal payment per month. Your monthly expenses consist of the principal payment plus the interest payment.
Decreasing net monthly costs
Compared to an annuity mortgage, linear mortgages have higher monthly costs intially. The tax advantage decreases faster in the case of a linear mortgage, due to the higher principal payment. The more you repay, the more both your gross and net monthly costs will decrease.
- Gross and net monthly costs decrease during the mortgage term;
- Equal pricnipal payment every year;
- Higher monthly costs initially compared to annuity mortgages;
- Principal payment during the mortgage term.
Should I opt for an linear mortgage?
A linear mortgage presents several advantages worth considering, particularly for those anticipating changes in their financial situation.
For individuals expecting a decrease in income over time, such as transition to part-time work or retirement, a linear mortgage may be the optimal selection. Paying down the loan balance at a consistent rate can sometimes lead to additional interest rate discounts ultimately saving you money.
If your plans for instance involve relocating in the near future due to international moves, a linear mortgage is a advisable choice. It ensures that your loan aount steadily decreases, primarily during the initial years, which can be advantageous when you’re on the move.
Making this decision can be a tough choice, because the type of mortgage that suits you best depends on numerous factors. It is therefore always wise to discuss your options with a mortgage advisor. At Brickle, we are happy to analyse your finanical situation and help you make a suitable choice!