Types of mortgages for buying a house in the Netherlands

There has been a bit of a buzz about mortgage interest rates in the past few days, but the changes so far are unlikely to have much of an impact on your housing buying power. But if you are planning to buy a house in Amsterdam or anywhere in the Netherlands for that matter, now is a good time to think about what interest rates might mean for your tax bill.

At the moment in the Netherlands you can deduct the interest you pay on your mortgage from your taxable income, provided you meet certain conditions – and have the right type of mortgage.

How much you can claim depends on your income and in general, the more you earn, the more you can deduct. The government is gradually reducing this: If you pay tax at the highest rate, the deduction was reduced to 43% this year and will go down again to 40% in 2022.

But while there are lots of different sorts of mortgage available in the Netherlands, only two allow you to subtract your mortgage interest payments from your taxes. These mortgages are the annuity mortgage (annuïteitenhypotheek) and the linear mortgage (lineaire hypotheek).

The annuity mortgage

An annuity mortgage, also known as a repayment mortgage, is the most common type of mortgage. The lender works out the amount you need to repay each month to clear your mortgage by the end of an agreed term. Your monthly repayment is made up of two parts:

  • An interest payment on the loan (will reduce over time)
  • A capital repayment (increases over time)

In the early years, most of your repayments will go toward paying off interest on your mortgage. But as your mortgage reduces, the interest part of the repayment goes down. So as time goes on, more of your monthly repayments go toward paying off the capital.

Annuity mortgage graphic

The linear mortgage

The linear mortgage repayment is made up of two parts:

  • An interest payment on the loan (will reduce over time)
  • A capital repayment (fixed amount per month)

With a linear mortgage, you repay the mortgage loan by a fixed amount every month. On top of this you pay interest, but the interest payments will reduce over time since you are gradually paying off the mortgage loan.

linear mortgage graphic

More about the different kind of mortgages in the Netherlands

There are several other types of mortgages in the Netherlands but, remember, you won’t qualify for a tax break if you use them.

  • The aflossingsvrije hypotheek (interest-only mortgage) is a mortgage in which you only pay interest on the loan and agree to repay the capital at the end of the period from another source. 

  • A krediethypotheek (a credit mortgage) is a flexible mortgage. You pay monthly interest on the amount you borrow, which depends on the value of your house.

  • A spaarhypotheek (savings mortgage or guaranteed life life insurance mortgage) is linked to a life insurance policy with a guaranteed return. The interest you get on your premium is equal to the interest you pay, so you are 100% sure that your mortgage will be repaid at the end of the mortgage term.
  • A bankspaarhypotheek (guaranteed savings account mortgage) offers a high level of security. You save money at a fixed rate which is equal to the mortgage interest rate, and at the end of the term you will be sure that you have saved enough money to repay the mortgage loan.
  • A hybride hypotheek (hybrid mortgage) is a combination of interest-only, savings and investment mortgages. You make interest payments but you have flexibility in how you generate the capital to repay the loan.

For more on the different types of mortgage available in the Netherlands, check out the housing dictionary on MyDutchMortgage.online