Linear mortgage: fixed repayments, falling debt
With a linear mortgage, you repay a fixed part of the loan each month. On top of that, you pay interest on the remaining debt. If the interest rate stays the same, your gross monthly payment therefore falls. Payments are highest at the start.
Responsible for the content: Ricardo Roso. Updated on .
How is the fixed repayment calculated?
You divide the principal by the agreed number of payment periods. In a purely mathematical example of €300,000 over 360 monthly payments, that is around €833.33 in principal repayments per month. Interest is paid on top. After 120 full payments in this example, €100,000 has been repaid and €200,000 remains. In actual administration, rounding may result in a small final adjustment.
This example deliberately excludes an interest rate, taxes and costs. It shows only how the debt falls. Your mortgage offer determines the actual instalment amounts and payment arrangements.
Why do gross monthly payments fall?
The principal repayment stays the same, but interest is calculated on a steadily smaller balance. The interest payment therefore falls while the rate remains unchanged. When your fixed-rate period ends, a new rate may change this pattern. A higher interest rate may partly or entirely offset the fall in your monthly payment.
Also include maintenance, insurance, taxes and any owners' association (VvE) contributions in your housing budget. Those expenses do not move in line with your mortgage repayments. A falling mortgage payment therefore does not mean that all housing costs fall every year.
Comparing linear and annuity repayment
Always compare the same principal, term and positive interest rate. Linear repayment then starts with a higher gross monthly payment and reduces the debt faster than annuity repayment. With a rate that remains unchanged over the full term, the total interest is therefore lower. In return, you need enough room in your budget for the higher initial payments.
The distribution over time matters too. Can you afford the higher initial payments while retaining a financial buffer? And do you want less debt later? A lower interest total is only one part of that decision.
Read how the monthly payment is made up with an annuity mortgage.
Interest deductions and net monthly payments
For new owner-occupied home debt from 2013, linear repayment within no more than 30 years may meet the tax repayment requirement. How the money is used and your personal situation also determine whether interest is deductible. As the interest payment falls, the tax benefit may also decrease. The mortgage type alone does not provide a complete net calculation.
Looking ahead and making changes later
Test your budget with a lower income or higher interest rate too. A clear repayment schedule does not prevent other expenses from rising. Do you want to make additional repayments, change the term or convert a loan component? First have the conditions, any charges and the consequences for your financial buffer and tax position assessed.
With mortgage advice from RFD, your housing plans and affordable monthly payments come first.
Approximately how much can you borrow?
The RFD calculator gives an initial indication for an owner-occupied home. It uses an annuity repayment basis, a 30-year term and a reference rate for NHG with a 10-year fixed-rate period. The result does not compare linear and annuity mortgage offers and is not approval from a lender.
You could start with an indicative maximum mortgage calculation and then have your preferred repayment method taken into account.
Compare the features
| Feature | Linear | Annuity |
|---|---|---|
| Principal repayment | The same each period | Starts lower and increases |
| Gross interest and principal payment | Starts higher and falls | Stays the same with unchanged interest and arrangements |
| Initial reduction in debt | Faster | Slower |
| Total interest in this comparison | Lower | Higher |
Services and comparison documents
The service comparison document describes our financial services and the stated costs. We agree the services and costs for your enquiry with you personally.
Frequently asked questions
Is linear repayment always cheaper?
With the same principal, term and unchanged positive interest rate, you pay less interest overall than with annuity repayment. Your actual comparison also depends on rates, costs, taxes and changes.
Will my monthly payment always fall?
Repayment reduces the interest component for as long as the interest rate stays the same. A new interest rate or a change to the loan may alter the pattern.
Will the loan be repaid at maturity?
If you make all agreed repayments according to the schedule, the linear loan component will be repaid at the agreed maturity date. Other loan components may still be outstanding.
This is general information, not personal mortgage advice or a finance offer. Your options and the tax implications depend on your circumstances and the provider's terms. Read the disclaimer.
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Sources for this guide
General information from RFD. Sources consulted on . Rules and terms may change.
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