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Are you about to buy a home or are you curious if your current mortgage still suits your situation? Then it is good to know what types of mortgage there are and what the differences are. Below, we explain the three most common forms of mortgage so that you can make the right choice.
With an annuity mortgage, you pay a fixed gross amount each month, consisting of interest and repayment. In the beginning, you mainly pay interest and repay less. Over time, this changes: you repay more and more and pay less interest.
• Your monthly payments remain the same in the beginning.
• Later, your net monthly payments may increase because you have less interest deduction.
• Suitable if you expect your income to increase in the future.
Preview
Suppose you have an annuity mortgage of €200,000 with 2% interest and a term of 30 years. In the first year, for example, you pay €1,200 per month, most of which is interest. Over time, the interest share falls and repayment increases. Although you have more interest deductions in the beginning and your net monthly payments are lower, they may increase later when the interest deduction decreases.
With a linear mortgage, you repay a fixed amount each month. As a result, your mortgage debt decreases faster and you pay less and less interest.
• Your monthly payments are higher in the beginning but fall over time.
• Over the entire term, you pay less interest than with an annuity mortgage.
• Suitable if you want to repay more immediately and want lower long-term monthly payments.
Preview
Suppose you have a loan of €200,000 with an interest rate of 2% and a term of 30 years. In the first year, for example, you pay €1,500 per month, much of which is interest. Every year, your monthly payments are lower because you pay more and more and therefore pay less interest. At the end of the term, you will have paid significantly less interest than with an annuity mortgage.
With an interest-only mortgage, you only pay interest and do not repay your loan by default. This ensures low monthly payments, but also means that you have to repay the debt at the end of the term.
• You have low monthly payments because you don't repay.
• The mortgage remains outstanding, so you have to arrange a repayment later.
• Since 2013, interest is no longer tax deductible for new mortgages.
• If you took out an interest-only mortgage before 2013, you are entitled to a 30-year mortgage interest deduction on that part. You also retain this right if you move or transfer the mortgage to another lender.
• Suitable if you have sufficient savings or other financial resources to repay later. You can also refinance your mortgage at the end of the term.
Preview
Suppose you have an interest-only mortgage of €200,000 with an interest rate of 2%. You pay €300 in interest each month, but you don't pay anything else. As a result, your monthly payments are relatively low. At the end of the term, however, you must repay the full €200,000, which you can do with savings or transfers, for example.
Choosing the right mortgage depends on your personal situation and future plans. We are happy to help you find the most attractive type of mortgage. Leave your details and our advisors will contact you as soon as possible.
More insight into your financial situation? Get your mortgage calculated and do the free mortgage check. Together, we will discuss the options based on your personal situation.