Linear mortgage
With a linear mortgage you repay exactly the same amount every month. Your debt shrinks evenly and you pay less and less interest, so your total monthly payments come down over the years.
How does a linear mortgage work?
The maths is simple: you divide your loan amount by the number of months, and that is what you repay each month. On top of that you pay interest on whatever is still outstanding. And since your debt gets a little smaller every month, the interest drops too. So your total monthly payment steadily falls over the term.
That means you start with the highest payments, but across the whole run you pay less interest than with an annuity mortgage. Since 1 January 2013 a new mortgage has to be repaid in full within 30 years to keep the right to mortgage interest relief. A linear mortgage clears that bar easily.
Linear mortgage calculation example
Take € 350,000, a 30-year term (360 months) and 4% interest. Your repayment is then € 350,000 / 360 = roughly € 972 every month. The interest tapers off month after month, along with your debt:
| Month | Remaining debt | Repayment | Interest | Monthly payment |
|---|---|---|---|---|
| 1 | € 350,000 | € 972 | € 1,167 | € 2,139 |
| 120 | € 234,306 | € 972 | € 781 | € 1,753 |
| 240 | € 117,639 | € 972 | € 392 | € 1,364 |
| 360 | € 972 | € 972 | € 3 | € 975 |
The figures are rounded and meant as an illustration. You can see the monthly payment drop from just over € 2,100 at the start to under € 1,000 towards the end.
Pros and cons
Pros
- Your debt falls quickly, especially in the first years.
- Fixed, clear repayment each month.
- Your monthly payments fall as the term progresses.
- You pay the least interest over the full term.
Cons
- The highest monthly payments are at the start, so you do need to be able to carry them.
- The tax benefit falls faster than with an annuity mortgage.
Who is a linear mortgage suitable for?
Can you absorb those higher payments at the start, and do you mainly want to be rid of your debt fast? Then linear is a solid choice: later on you pay less and your costs are lower. Stuck between linear and annuity? Have both worked out on the basis of your own income.
Frequently asked questions about the linear mortgage
A mortgage where you repay the same amount every month. Your debt comes down steadily, you pay less and less interest, and your total monthly payments fall as the term goes on.
Your repayment is the same each month, but at the start your debt is still at its largest. And on that large debt you pay the most interest. That is why your payment is highest in the first year, and then drops.
Usually yes. Many providers let you repay an extra 10% to 20% per year penalty-free. Go beyond that and an early-repayment penalty may apply. So always take a look at your provider's terms.
With linear you repay a fixed amount each month and your payments fall. With an annuity mortgage your gross amount stays the same. Linear is cheaper over the term, but starts with higher payments.
Compare Linear mortgage with other types
Annuity mortgage
The same gross amount every month. Mostly interest at first, mostly repayment later.
Continue readingInterest-only mortgage
Pay interest only. The principal stays outstanding the whole term.
Continue readingCalculate maximum mortgage
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