From 2013, the number of permitted mortgage types has been reduced to two, namely the linear mortgage and the annuity mortgage. These mortgage types do not postpone mortgage repayment until the end date, but repayments are made monthly. Popular mortgage types such as the savings mortgage, investment mortgage and interest-only mortgage have no longer been available since January 1, 2013. This restriction has been implemented to keep the mortgage interest deduction scheme affordable. Types of mortgages in which the mortgage debt is not immediately paid off are too expensive for the Dutch treasury. For a period of 30 years, homeowners continue to deduct the mortgage interest paid from their income. By requiring interim repayment, the tax benefit becomes increasingly smaller.
Linear mortgage or annuity mortgage?
Most home buyers will prefer an annuity mortgage instead of the linear mortgage. The linear mortgage has the major disadvantage that the monthly costs are initially high. The gross monthly costs of the annuity mortgage remain the same. You continue to pay the same amount every month during the fixed interest period. The net costs do increase in this type of mortgage, because less and less mortgage interest is charged. The monthly repayments increase during the term. In the linear mortgage, the repayment is divided into equal parts.
How high are the monthly costs for a linear mortgage?
The monthly costs consist of mortgage interest, repayment and premium for a term life insurance policy. The amount of mortgage interest payable decreases because the mortgage is paid off monthly. The term life insurance linked to the mortgage contains a linearly decreasing insured amount. Assuming a mortgage of 216,000 and a mortgage interest rate of 5%, the mortgage interest to be paid in the first month is 900. Repayments must be made: 216,000 / 360 months = 600. The mortgage costs for the first month are 1,500.00 . In the second month, the costs drop because the mortgage interest is calculated on a lower mortgage debt. Mortgage interest in the second month: 897.50. The total mortgage costs will drop to 1,497.50 . The amount of the premium for term life insurance depends on many factors. The premium depends in advance on the age of the insured and the insured amount.
Is the linear mortgage a smart choice?
Compared to the mortgage types in which the mortgage repayment is postponed to the future, the linear mortgage is an expensive mortgage type. Yet the linear mortgage offers advantages. The mortgage type is aimed at reducing the mortgage debt as quickly as possible. After a term of just a few years, a large part of the mortgage has already been paid off. The linear mortgage is a smart form of mortgage, but you must be able to bear the costs.
Lower maximum mortgage amount
The first monthly payment is the highest. The subsequent monthly installments will gradually become lower. The maximum amount you can get as a mortgage partly depends on the expenses you have to be able to bear. Banks take into account the high monthly costs in the first years of the mortgage term and will be more careful when granting a mortgage. This will therefore result in a lower mortgage amount.
Why choose a linear mortgage?
Most homeowners will opt for an annuity mortgage when taking out a mortgage. Why should you choose a linear mortgage? Homeowners who want to reduce their debt as quickly as possible should opt for a linear mortgage. One reason to make additional repayments quickly is to prevent your house from becoming unsellable due to falling house prices. Another good reason is that your income will decrease in the future, for example due to retirement.