Annuity or Linear Mortgage in the Netherlands: Which Should You Choose?

Read Also: Top 15 Questions Expats Have About Mortgages in The Netherlands

Why This Choice Even Exists

Since 2013, Dutch tax law has been strict: to deduct your mortgage interest from income tax (the famous hypotheekrenteaftrek), your mortgage must be fully repaid within 30 years on an annuity or linear schedule. Those are the two structures that qualify for the tax break on a primary residence.

Other repayment types are still available, but choosing them for a new purchase means losing the tax deduction. For most expats buying a home, the real choice is between annuity and linear. The interest rate, lender, and house stay the same, but the numbers work out differently.

Annuity Mortgage: Predictable Now, More Expensive Later

With an annuity mortgage, your gross monthly payment stays the same as long as your interest rate is fixed. The amount does not change, but the way it is split between interest and repayment does.

• In the early years, most of your monthly payment is interest, with only a small slice going to actual repayment of the loan.
• As the years pass, the interest portion shrinks, and the repayment portion grows.
• By the end of the 30-year term, you are paying almost pure principal.

It is a bit like a slow tide: the payment stays at the same level each month, but over time, more of it goes toward paying off your loan.

The Case for Annuity

Most Dutch buyers choose this option because the starting monthly payment is lower than with a linear mortgage for the same loan. This extra room in your budget is especially helpful in the first year, when you also have to pay for a notary, moving costs, and furnishing your new home.

The downside is that you repay the principal more slowly, so you pay interest on a larger balance for a longer time. Over 30 years, this means you pay more total interest than with a linear mortgage.

From a tax perspective, your interest deduction is largest in the early years, when your interest payments are highest. It gradually decreases as you repay the loan. The tax benefit is bigger at the start.

Linear Mortgage: Higher Now, Cheaper Overall

With a linear mortgage, you pay back a fixed amount of the principal each month from the first to the last payment, and interest is calculated on what is left of the loan.

• Your first monthly payment is the highest because you pay interest on the full loan amount.
• Each month after that, the interest part gets a bit smaller, so your total monthly payment goes down over time.
• By around year 20, your monthly payment is much lower than when you started.

Both options have a 30-year term and the same end result, but the payment pattern is very different.

The Case for Linear

Some buyers prefer this option because you build equity faster and pay much less total interest over the life of the loan. If you can handle the higher starting payment, the linear mortgage is cheaper overall.

The downside is that the first few years are expensive. If your budget is tight after buying, a linear mortgage can be a monthly reminder of your new costs.

For taxes, your interest deduction is highest at the beginning but decreases faster than with an annuity, since you repay the principal more quickly. The tax benefit does not last as long.

Side-by-Side Comparison

Here is a simplified comparison, using a €350,000 loan at 4% fixed for 30 years.

The exact numbers will depend on your interest rate, loan amount, and fixed-rate period. To see what works for you, Financial Consultancy Holland offers a free mortgage calculator that compares both options and emails you a personalized report with total interest, monthly payments, and NHG eligibility.

Who Tends to Pick What

There is no single right answer, but there are some common trends.

Annuity tends to suit:

• First-time buyers and younger expats who want predictability
• Households where the starting monthly payment matters more than the 30-year total
• Buyers who value a stable, boring number they can plan around

Linear tends to suit:

• Buyers with more economic cushion who can absorb a higher starting payment
• People who want to build equity quickly, to refinance or move up the ladder sooner
• Older buyers who want the loan to shrink faster before retirement

You can usually make extra payments on an annuity mortgage each year without a penalty, often up to 10% of the original loan amount, though lender rules can vary. Some expats choose annuity for the lower starting payment, then pay extra when they receive a bonus.

How the Tax Break Actually Works

The Dutch mortgage interest deduction (hypotheekrenteaftrek) lets you subtract the interest you pay from your taxable income in Box 1. In 2026, the maximum rate at which you can deduct is 37.56%, and the deduction runs for a maximum of 30 years from when you took out the mortgage.

Two conditions to remember:

• The property must be your primary residence.
• The mortgage must be annuity or linear (post-2013 rule), fully repaid within 30 years.

About the 30-Year Term

It is the maximum allowed, not a requirement. If you choose a 20- or 25-year annuity or linear mortgage, you still qualify for the deduction. Most buyers pick 30 years to lower their monthly payment and use the full deduction period, but you can choose a shorter term if your budget allows.

That is why nearly every expat here chooses one of these two options. Interest-only mortgages may seem appealing, but you lose the tax benefit on a new purchase.

Read Also: Closing Costs of Buying a House in the Netherlands

What About the Other Mortgage Types?

For completeness, other structures still exist in the Dutch market:

• Interest-only (aflossingsvrij): you pay only interest, never repay the principal until the end. Popular before 2013. For a new purchase, it does not qualify for interest deduction, so it is rarely used except in specific cases (refinancing an older loan, second home, partial mix).
• Savings and investment mortgages (spaarhypotheek, beleggingshypotheek): essentially closed to new customers. If you had one from years ago, you may still hold it, but no one is signing them today.

For almost every expat buying a home in 2026, the main decision is between annuity and linear mortgages.

One More Thing: NHG

If your purchase price is at or below the 2026 NHG limit of €470,000, including any financed energy-saving improvements, you may qualify for the National Mortgage Guarantee (NHG). This requires a one-time fee of 0.4% of the mortgage amount and usually gets you a lower interest rate. NHG is available for both annuity and linear mortgages.

How to Make Your Decision

Ask these two honest questions:

• How tight is your monthly budget in the first three years? If it is tight, annuity gives you more flexibility. If it is comfortable, linear will save you money overall.
• How much do you care about paying less total interest over 30 years versus having predictable payments now? If you want to pay less overall, choose linear. If you prefer stable payments, choose annuity.

Next, check your own numbers. Want to see how annuity and linear mortgages compare for your income, house price, and situation? The FCH mortgage calculator will email you a free personalized report showing both options side by side, including your maximum borrowing capacity, monthly payments, total interest, and NHG eligibility. No signup or obligation required.