Annuity vs Linear Mortgage Netherlands — Which Repayment Structure Saves You More?

When you apply for a Dutch mortgage, your advisor will ask you to choose between an annuïteitenhypotheek (annuity mortgage) and a lineaire hypotheek (linear mortgage). Most Dutch buyers pick annuity without fully understanding the difference. For expats — especially those on the 30% ruling with a countdown clock on their tax benefit — the choice between these two structures can be worth tens of thousands of euros over the loan term.

How Each Structure Works

Annuity mortgage (annuïteitenhypotheek): Your monthly payment stays constant throughout the loan. In the early years, the majority of each payment is interest; over time, the proportion shifts toward principal repayment. The total amount paid every month never changes — but what that payment consists of changes dramatically. In year one on a €350,000 mortgage at 4.5%, you might pay €1,700/month — €1,313 in interest and €387 in principal. In year 25, you're paying the same €1,700, but only €330 is interest and €1,370 is principal reduction.

Linear mortgage (lineaire hypotheek): The principal repayment is fixed and constant — you pay down the same amount of capital every month. Because your outstanding debt falls faster, the interest component (charged on the remaining balance) decreases over time. This means your monthly payment starts higher than an annuity and falls each year. On the same €350,000 mortgage at 4.5%, you might start at €2,104/month and end at roughly €980/month in the final year.

The Total Interest Comparison

Linear wins on total interest paid — by a meaningful margin. Because principal is repaid faster in a linear structure, the outstanding balance the bank charges interest on is always lower than it would be under an annuity. Over a 30-year term, the total interest difference is typically 15–20% in favor of linear.

On a €350,000 mortgage at 4.5% over 30 years:

• Annuity: approximately €289,000 in total interest paid
• Linear: approximately €236,000 in total interest paid

That €53,000 gap is real money. But whether the linear structure is actually better for you depends on two other variables: the tax deduction and your cash flow at the start of the loan.

The Mortgage Interest Deduction (Hypotheekrenteaftrek) Factor

Dutch homeowners can deduct mortgage interest paid on their primary residence from taxable income in Box 1. This is why both annuity and linear mortgages are eligible for the deduction — interest-only mortgages are not, for new loans originated after January 1, 2013.

The annuity structure front-loads interest payments. In the early years, you pay more interest under an annuity than under a linear mortgage, which means your tax deduction is larger in years 1–15. This partially offsets the annuity's higher total interest cost.

For expats earning above the top bracket threshold (€78,426 gross in 2026), the deduction rate is capped at 37.56% — not the full 49.5% top bracket rate. High earners effectively subsidize their own mortgage interest. This cap reduces the advantage of front-loaded interest deductions under the annuity structure, which nudges the math slightly more toward linear.

The Cash Flow Reality Check

The linear mortgage's higher starting payment is its biggest practical barrier. In an already expensive market where you've just deployed €15,000–€20,000 in closing costs and possibly bought furniture, the lower early monthly payment of an annuity provides genuine breathing room.

A rough comparison on a €350,000 mortgage at 4.5%:

For dual-income couples with comfortable buffers, the linear structure's lower total cost and faster equity build is usually worth the higher early payments. For a single buyer stretching to afford a property in Amsterdam or Utrecht, the annuity's predictable payment may be the more prudent choice.

The 30% Ruling Expiry Calculation

Here is where this decision gets specific to expats. The 30% ruling is temporary — typically five years from arrival, though the government is progressively tightening it. When the ruling expires, your net monthly income drops. If you built your budget around the higher net income during the ruling period, a high linear mortgage payment in year 1 may be fine — but it needs to remain sustainable when your take-home falls.

From 2027, the ruling is scheduled to taper to 27% rather than 30%, with potential further restrictions in future fiscal years. Build your repayment model on what you can service from your gross salary alone, without the ruling's net income boost.

Which Wins for Most Expats?

There is no universal answer, but the practical guidance is:

• If you have sufficient cash flow buffer and plan to stay in the Netherlands long-term: linear wins on total cost and builds equity faster, which matters if you want to move up the property ladder.
• If cash flow is tight at the start, or you value predictability: annuity is simpler to budget around and still qualifies for the full interest deduction.
• If you're uncertain how long you'll stay: annuity carries slightly less risk, because the lower early equity build is less of a concern if you may sell in five years anyway.

The choice also interacts with the NHG threshold and your lender's specific products. Some specialist expat mortgage advisors model both structures side-by-side with your exact income figure, ruling status, and expected stay duration. That exercise takes about an hour and can be worth thousands of euros over the loan term.

The Buying Property in the Netherlands — Expat Guide covers mortgage structure selection alongside the full financing process, documentation requirements, and what to expect at the notary desk.

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