Offset Mortgage Calculator
Calculate how much you could save with an offset mortgage. Compare scenarios where your savings reduce the interest charged on your mortgage balance.
Offset Mortgage Details
Enter your mortgage and savings information
How Offset Mortgages Work
- Balance Offset: Your savings reduce the mortgage balance for interest calculations
- No Interest Earned: You don't earn interest on offset savings
- Tax Benefits: Avoiding savings interest can reduce tax liability
- Flexibility: Access your savings anytime without penalties
- Family Offset: Some lenders allow family members' savings to offset
- Current Accounts: Many include current account balances in offset
Pros and Cons
Advantages
- Significant interest savings with large offset balances
- Tax-efficient for higher rate taxpayers
- Maintain access to your savings
- Reduce mortgage term without overpaying
Disadvantages
- Higher interest rates than standard mortgages
- Need substantial savings to be worthwhile
- Miss out on potentially higher investment returns
- Limited product choice
Frequently Asked Questions
Common questions about offset mortgages
How much do I need in savings for an offset mortgage to be worthwhile?
Generally, you need at least £25,000-£50,000 in savings for an offset mortgage to overcome the higher interest rate. The exact amount depends on the rate difference and your tax situation. Higher rate taxpayers benefit more due to the tax efficiency of avoiding savings interest.
Can I still access my savings with an offset mortgage?
Yes, one of the key benefits of offset mortgages is that you maintain full access to your savings. You can withdraw money anytime without penalties, though this will reduce the offset benefit and increase your mortgage interest payments going forward.
Are offset mortgages more expensive than standard mortgages?
Offset mortgage rates are typically 0.2-0.5% higher than equivalent standard mortgages. However, the interest savings from offsetting your savings balance often more than compensate for this premium, especially if you have substantial savings or are a higher rate taxpayer.
What happens to my savings interest with an offset mortgage?
With an offset mortgage, you don't earn interest on your savings. Instead, you save mortgage interest on the equivalent amount. This is often more valuable, especially for higher rate taxpayers who would pay 40% tax on savings interest but save the full mortgage rate through offsetting.
Can family members' savings be used for offsetting?
Some lenders offer "family offset" products where family members' savings can be used to offset against your mortgage. This can be particularly beneficial for parents helping children, though there are usually strict criteria about relationships and account management.