Annuity mortgage (annuïteitenhypotheek)
In the early years of an annuity mortgage, your monthly payments are largely interest, with only a small portion of your payment going toward paying down the principal. Over time, as you gradually decrease your debt, the amount of interest you pay also decreases. Towards the end of the mortgage period, the balance reverses, meaning that most of your payment goes toward paying down the principal while the rest goes toward interest.
In the early years of your mortgage, an annuity mortgage offers lower monthly payments than a linear mortgage.
Linear mortgage (lineaire hypotheek)
With a linear mortgage, you have a fixed monthly payment—plus interest, of course. Your debt is reduced every month, which also reduces the interest owed. A linear mortgage is useful when you want to pay off your mortgage as quickly as possible. However, your initial payments are relatively high.
Other Dutch mortgage models
Alternative Dutch mortgage models are mainly variations of annuity and linear mortgages. However, if you take out one of these mortgage forms, you may no longer be entitled to mortgage tax relief.
Interest-only mortgage (aflossingsvrije hypotheek)
With an interest-only mortgage, you don’t pay down the principal of your loan. Instead, you only pay the interest on a monthly basis. Banks only permit this kind of mortgage under certain circumstances, and you will need to repay the capital at a later date from savings or investment accounts.
Credit mortgage (krediethypotheek)
A credit mortgage loan is a flexible mortgage. Similar to a normal bank account, you can withdraw and deposit money. You pay monthly interest payments on the amount you borrow, which depends on your property’s value.
Investment mortgage (beleggingshypotheek)
With an investment account mortgage, you invest a certain amount into an investment or stock market account. This amount can be paid as a lump sum or in monthly or annual installments.
Life insurance mortgage (levenhypotheek)
This mortgage combines a loan with a life insurance policy. You pay a monthly or an annual premium for life insurance plus interest on the loan. Over the mortgage term, you do not pay off your debt, but it is redeemed at the end of the term via the life insurance policy. There is also a guaranteed version of this mortgage with a guaranteed return that enables you to repay the loan at the end of the term.
Savings mortgage (spaarhypotheek)
This type of mortgage offers a high level of security by linking a savings account to your mortgage. You make monthly interest payments and, instead of repayments, you deposit money into the linked savings account with a fixed interest rate that is equal to your mortgage interest rate. At the end of the mortgage term, you repay the mortgage from the savings account.
Hybrid mortgage (hybride hypotheek)
A hybrid mortgage is a combination of interest-only, savings and investment mortgages. You make interest payments, but you have flexibility in generating the capital to repay the loan. During the course of the mortgage term, you can switch between saving and investing. This allows you to take advantage of low-interest rates and other investment opportunities, or you can be more risk-averse in a savings account.