When you buy a house, you may use a mortgage. But which mortgage is best suited for you? And what do all those types of mortgages mean for you? In this article we look at the annuity mortgage that, in addition to the other well-known mortgage types such as a start-up mortgage and a linear mortgage, is also a modern form of borrowing money that also has an interest deduction for the tax alongside other benefits. With other previously popular forms of mortgage, this extremely advantageous interest deduction has already been abolished.
Annuity mortgage explained
The annuity mortgage is a form of mortgage in which the monthly amount remains the same throughout the term. With the word annuities, one might mistakenly think that annuity refers to the word “year.” Nothing is less true. This loan for a house is paid off annually. Furthermore, the monthly payment always consists of a part interest and a part repayment.
The word annuity is here a synonym for the monthly amount to be paid. It is important to know that in the beginning the part for the repayment itself is low to very low and the part in the interest is larger. Just the opposite applies at the end of the journey. Then you pay less interest and the repayment part is larger.
Is the annuity mortgage deductible from your taxable income?
In the Netherlands, the interest part of the annuity mortgage is still deductible on the tax return. This means that in reality you only pay the amount of the repayment.
This means that over time, the current amount to be paid (the difference between the interest and the total monthly amount) becomes higher and higher. However, due to the still prevailing inflation, monthly repayments are still perceived as portable.
The annuity mortgage in the Netherlands is currently still deductible. This is because this mortgage complies with the guidelines of the law on the revision of the owner-occupied home legislation of 1 January 2019.
This law stipulates that the interest from that date is only deductible if it is paid during the term of the loan for the repayment of the home paid in full, and this loan is repaid at least in annuities (ie per month). With this, the annuity mortgage complies with this revised Dutch legislation and this type of mortgage is still deductible from your taxable income.
What are the advantages
The annuity mortgage offers you certainty. You know exactly where you stand every month. You can still deduct the interest part from your taxable income until further notice and at the end of the term of the loan both the interest and the current repayments are fully paid off.
You don’t save money like a mortgage savings, but on the other hand, the savings portion of the mortgage savings suffered in many cases from the economic crisis. This means that the annuity mortgage stands for reliability and security for the consumer.