Which mortgage type saves more money?

A linear mortgage always costs less in total interest because the principal reduces faster. Savings can be tens of thousands of dollars on a typical 30-year loan.

Which should I choose?

Choose annuity for predictable payments and maximum affordability upfront. Choose linear if you can afford higher initial payments and want to minimise total interest paid.

Annuity vs Linear Mortgage — Side-by-Side Comparison

Loan amount

Annual interest rate

Loan term

🔵 Annuity mortgage

Monthly payment

Payment changes?Fixed

Total interest

Total cost

🟠 Linear mortgage

First monthly payment

Payment changes?Decreases monthly

Total interest Lower

Last monthly payment

Annual payment — annuity vs linear

Annuity Linear

About the Annuity vs Linear Mortgage Comparison

The two main mortgage repayment structures differ in how payments are allocated between interest and principal over time. An annuity mortgage keeps monthly payments fixed throughout the term — early payments are mostly interest, later payments are mostly principal. A linear mortgage keeps principal repayment constant each month, so payments start higher but decrease steadily as the outstanding balance falls and interest charges reduce.

How each structure works

Annuity mortgage — fixed monthly payment throughout the term. Easier to budget. Higher total interest paid because principal reduces more slowly in early years.
Linear mortgage — constant principal repayment each month; total payment decreases as balance falls. Higher initial payments but lower total interest paid over the full term.

Total interest comparison

The linear mortgage always pays less total interest than an equivalent annuity mortgage because the principal reduces faster in early years. On a 300,000 mortgage over 30 years at 4%, the linear structure typically saves 20,000-30,000 in total interest compared to the annuity structure, though initial monthly payments are higher by around 20-25%.

LTV and remortgaging strategy

Your Loan-to-Value ratio affects the mortgage rate available to you. Lenders offer rate tiers at 60%, 70%, 75%, 80%, 85%, and 90% LTV. Falling into a lower LTV band when remortgaging can unlock a meaningfully better rate. The linear mortgage's faster principal reduction means you cross these LTV thresholds sooner, potentially saving further on refinancing costs.

60% LTV — typically the best available rates; requires 40% equity
75% LTV — good rates; crossed more quickly on a linear mortgage
80% LTV — moderate rates; widely available from high-street lenders
90% LTV — higher rates; the 85-90% band has fewer lenders and higher premiums

Frequently Asked Questions

What is the difference between annuity and linear mortgage?

In an annuity mortgage, the monthly payment stays fixed. More of each payment is interest in the early years and more goes to principal later. In a linear mortgage, the principal repayment is the same each month, so the interest component falls steadily, reducing the total monthly payment over time.

Which mortgage type is cheaper overall?

The linear mortgage always costs less in total interest because the principal reduces faster. However, the annuity mortgage has lower initial monthly payments, making it more accessible for buyers whose income is stretched. The interest saving with linear is typically 10-20% of total interest paid.

Is the linear mortgage common in the UK?

No. The annuity (repayment) mortgage is overwhelmingly standard in the UK. Linear mortgages are common in the Netherlands and Belgium. UK lenders typically offer annuity structure by default; ask specifically if you want to explore linear.

Can I switch from annuity to linear mortgage?

Switching typically requires remortgaging with a new lender, which involves legal fees, a valuation, and potentially early repayment charges on your current deal. Compare the total interest saving against the switching costs to determine if it is worthwhile.

How do I calculate monthly payments for each type manually?

Annuity: M = P x r(1+r)^n / ((1+r)^n - 1), where r = monthly rate, n = months. Linear: monthly principal = P/n. Monthly interest = remaining balance x monthly rate. The linear total payment decreases each month. Use this comparison tool to model both structures for your specific loan.