Annuity vs Linear vs Interest-Only Mortgage in the Netherlands

The annuity mortgage is the most common mortgage type in the Netherlands. Your monthly payment (principal plus interest) stays the same for the entire term — typically 30 years. In the early years, most of the payment is interest and only a small portion goes toward reducing the principal. Over time, as the balance decreases, the interest portion shrinks and the principal portion grows, but the total monthly amount remains constant. This makes budgeting straightforward, but the principal is repaid slowly in the first years, meaning you build equity gradually. The mortgage interest portion is deductible in Box 1 for the primary residence, subject to conditions.

With a linear mortgage, you repay a fixed amount of principal each month plus interest on the remaining balance. Because the principal decreases steadily, the interest charged on it also decreases, so your total monthly payment goes down over time. The initial monthly payment is higher than an annuity mortgage for the same loan amount and term, but you pay less total interest over the life of the loan because the principal is repaid faster. This type can suit borrowers who expect their income to remain stable or who want to build equity quickly. The interest portion is deductible in Box 1 for the primary residence.

An interest-only mortgage requires you to pay only the interest each month — no principal is repaid during the term. The full loan amount is due as a lump sum at the end of the term. This results in the lowest monthly payment of the three types, but the highest total interest cost because the principal never decreases. Since 2013, new interest-only mortgages generally do not qualify for the mortgage interest deduction. However, some lenders allow an interest-only portion (typically up to 50% of the loan) alongside a repayment mortgage, and existing interest-only mortgages from before 2013 retain deduction rights under transitional rules. An interest-only mortgage carries repayment risk: you must have a plan to repay the principal at the end of the term, whether through savings, investments, property sale or refinancing.

The key practical difference between these three mortgage types is how your monthly payment and outstanding balance evolve over the term. An annuity mortgage keeps your payment flat — good for long-term budgeting — but builds equity slowly at first. A linear mortgage starts with higher payments that decrease over time, building equity faster and costing less total interest. An interest-only mortgage keeps payments at their lowest throughout, but you owe the full principal at the end and build no equity during the term. The Dutch Mortgage Payment Calculator lets you model these differences with your own loan amount, rate and term.

The hypotheekrenteaftrek (mortgage interest deduction) allows you to deduct mortgage interest on your primary residence from your Box 1 taxable income. The deduction is capped at a statutory maximum rate (37.56% in 2026), even if your marginal tax rate is higher. For expats on the 30% ruling, the deduction still applies but the benefit is smaller because a portion of your salary is already tax-free, reducing your taxable base. To qualify, the mortgage must be a qualifying mortgage type (annuity, linear, or certain other repayment types) and used to buy, improve or maintain the primary residence. Interest-only mortgages taken out after 1 January 2013 generally do not qualify unless they fall under specific transitional rules.

There is no universally best mortgage type — the right choice depends on your income trajectory, risk tolerance, how long you plan to stay, and whether you need the interest deduction. An annuity mortgage may suit buyers who want predictable payments and plan to stay long-term. A linear mortgage may suit buyers with a stable or rising income who want to build equity quickly and pay less total interest. An interest-only mortgage may suit buyers who have a clear repayment plan (such as investments or expected lump sums) and want the lowest monthly cost — but it carries the most risk. Many borrowers combine types, for example an annuity mortgage with a partial interest-only portion, subject to lender and tax conditions.