Which Dutch mortgage plan is right for you?

The NVM (The Dutch Association for Brokers) says there are signs that house prices in the Netherlands are beginning to creep up again. Calcasa reports that the number of signed deals is showing an “upward trend”. If you are planning to take the plunge and buy a home soon, financial advisor José de Boer from De Boer Financial Consultants has some advice about which type of mortgage to go for.

Given the housing market is moving again, it would be useful to get back to the basics by having a look at the types of mortgages you can choose from, if you are ready to become a homeowner in the Netherlands.

Mortgages in the Netherlands

So where do you start? First things first. If you want to take advantage of the generous Dutch tax relief on your mortgage interest payments, you have two basic options.

While there are lots of different sorts of mortgages available in the Netherlands, only two allow you to deduct your mortgage interest payments from tax - the annuity mortgage (annuïteitenhypotheek) and the linear mortgage (lineaire hypotheek).

Annuity and linear mortgages

An annuity mortgage, also known as a repayment mortgage, is the most common type. 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, which will reduce over time, and a capital repayment, which will increase.

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.

One thing that might help you decide: during the early years of the mortgage period, an annuities mortgage usually has lower monthly payments than a linear mortgage.

Mortgages and tax

If you do opt for an annuity or a linear mortgage, you will be able to cut your tax bill, provided the property is your main place of residence. How much you can claim depends on your income. In general, the more you earn, the more you can deduct.

The Dutch government is gradually reducing the tax break - it went down to 36,93% in 2023 and will go down again in 2024. At the moment, however, it is still a very useful saving!

There are several other types of mortgages in the Netherlands as well, but if you use them you will not be entitled to a tax break. Nevertheless, a different type of mortgage might fit your particular situation better than an annuity or linear model. A mortgage advisor will be able to help you assess if they could be right for you.

Advice

If you are wondering how much you can borrow at the moment, it might be sensible to talk to a mortgage advisor in person. House prices may be coming down but that might not be the case in the area where you are interested in buying. So it would be wise to get some expert advice to save you from potential disappointment.

Mortgage calculator

In addition, online mortgage calculators can only offer an approximate estimate of your borrowing capacity. They don’t take into account other income sources you might have, such as foreign currency income, bonuses, and the 13th month - all the more reason why it's worth speaking to a mortgage advisor in person. 

Buying a house is so much more than just seeing a property you like and signing on the dotted line. It is a complicated, life-changing process, so it is wise to get all the help you can get before you start. De Boer Financial Consultants helps expats find the right mortgage for their situation. Get in touch via the form below for free, independent advice.