What are the various mortgage types?
For new mortgages, two mortgage types for which you will be allowed mortgage interest deduction remain as of 2013: the linear mortgage and the annuity mortgage. For other mortgage types – also known as repayment mortgages – you will no longer receive mortgage interest deduction as of 2013, unless you are able to utilise the transitional law.
With an annuity mortgage, you pay the same gross amount every month, whereby the amount consists of a part that is used for repayment and a part that is interest. You pay off less of the mortgage initially. To summarize:
- The gross monthly costs remain the same during your fixed-rate period.
- The net monthly costs gradually increase during the mortgage term.
- You’ll incur lower monthly payments in the first few years compared to a linear mortgage.