Since the beginning of 2013, homeowners who want to make use of the mortgage interest deduction have been obliged to repay their mortgage in full and annuity or on a straight-line basis within a maximum of 30 years. This rule has ensured that the linear and annuity mortgage has gained considerable popularity this year. Research by Olive Chancellor shows that more than 70 percent of consumers choose an annuity or linear variant with a new mortgage.
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Linear and annuity mortgages are therefore popular and provide a considerable tax benefit. But what is the difference between an annuity mortgage and a linear mortgage?
What is the difference between linear and annuity mortgage?
With both a linear and annuity mortgage, you pay off the total mortgage debt during the term. The way you do that differs perform.
Are you taking out an annuity mortgage? Then you pay off relatively little at the start of the term. You pay a fixed amount every month, which consists of a part repayment and a part interest. In the first years of the term, the interest component is still relatively large and the repayment component is small. This ratio changes during the term because the mortgage debt also decreases. At the end, the repayment part is much larger than the interest part. The advantage of this is that the monthly charges are the same throughout the entire term.
With a linear mortgage, you pay off an equal part of the mortgage debt each month. The monthly costs are relatively high in the beginning. That is because with a linear mortgage you pay interest on the outstanding mortgage debt. Because this debt is being repaid slowly, you pay less and less interest and the monthly costs decrease as the term expires.
Difference linear annuity mortgage – Interest
The difference in mortgage interest from the linear and annuity mortgage is minimal. In fact, many providers demand the same mortgage interest for both forms. Are you looking for the lowest interest rate linear mortgage or the lowest interest rate annuity mortgage? Compare mortgage rates and find the best interest rate for these types of mortgage.