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Offset Mortgage Calculator

See how much mortgage interest you could save by linking your savings to your mortgage balance, compared with keeping them in a normal savings account.

£
%
years
£

Savings held in accounts linked to your offset mortgage.

%

What this money would otherwise earn in a normal savings account — used only to show the trade-off, not deducted from your result.

Interest you'd save by offsetting£48,841.59
Time saved34 months≈ 2.8 years
Offset payoff time266 months≈ 22.2 years
Total interest (standard mortgage)£177,588.02
Total interest (offset)£128,746.43
Savings interest forgone, for comparison£16,625.00What your offset balance would have earned in a normal savings account over the same period — not a loss, just the other side of the trade-off.

Standard monthly payment used in this comparison: £1,425.29. Offsetting shortens your mortgage rather than lowering your monthly payment, since the payment amount stays fixed while more of it goes to principal.

How this calculator works

With an offset mortgage, your linked savings are deducted from your mortgage balance before interest is calculated each period — you earn no separate interest on that money, but you avoid paying mortgage interest on an equivalent amount. This calculator keeps your normal (non-offset) monthly payment fixed and runs the amortisation month by month, but charges interest on the reduced balance:

Monthly interest = max(0, Balance − Offset savings) × monthly rate

Because the scheduled payment is unchanged but less of it is absorbed by interest, more goes toward principal each month — so the offset mortgage is paid off earlier and total interest is lower, in the same way an overpayment works. The calculator also estimates the interest your offset savings would otherwise have earned in a normal savings account, purely for comparison — this isn't money you've lost, just the other side of the trade-off, and for a taxpayer it's usually the less valuable option since ordinary savings interest is taxable while mortgage interest saved is not.

Worked example

Take a £250,000 mortgage at 4.75% over 25 years, with £25,000 held in linked offset savings. The standard (non-offset) mortgage would cost about£177,590 in total interest. With the £25,000 offset throughout, total interest falls to roughly£128,750 — a saving of about £48,840 — and the mortgage is paid off around34 months (just under 3 years) early, in about 266 months instead of 300. For comparison, if that £25,000 had instead sat in a normal savings account earning 3%, it would have earned roughly£16,600 in interest (before tax) over the same period — noticeably less than the interest saved by offsetting, and that £16,600 would typically be taxable too.

What affects your result

  • How much you keep offset — the larger your linked savings balance relative to your mortgage, the more interest you avoid paying each month.
  • Your mortgage rate — a higher mortgage rate makes each pound of offset savings worth more, since you're avoiding interest at that rate.
  • Consistency — withdrawing offset savings partway through (for a house deposit, holiday, or emergency) reduces the offset amount and therefore the ongoing saving.
  • Your tax rate — offsetting is generally most valuable for higher and additional-rate taxpayers, since it replaces taxable savings interest with tax-free mortgage interest saved.
  • Alternative savings rate — a higher rate available elsewhere narrows (but for most mortgage rates doesn't eliminate) the advantage of offsetting.

A note on accuracy

This calculator models a fixed offset balance held for the full comparison period and a constant scheduled payment, computed on full unrounded figures with rounding only for display. Real offset products vary — some offer daily rather than monthly offsetting, and your actual linked balance will fluctuate with your spending and saving. Offset mortgage rates and product terms differ between lenders, so use this as a guide alongside a specific product illustration. For general guidance, seeMoneyHelperand the Financial Conduct Authority.

Frequently asked questions

How does an offset mortgage work?

An offset mortgage links your savings account(s) to your mortgage. Instead of earning interest on your savings, the balance is deducted from your outstanding mortgage before interest is calculated each month — so you only pay mortgage interest on the difference. For example, with a £250,000 mortgage and £25,000 in linked savings, you'd pay interest as if you owed £225,000. Your savings stay accessible; you're just not earning separate interest on them while they're offset.

Is an offset mortgage worth it? Use the calculator to check.

It depends on how much you'd otherwise earn in savings interest versus how much mortgage interest you save. On a £250,000 mortgage at 4.75% over 25 years with £25,000 offset, this calculator shows total interest falling from around £177,590 to about £128,750 — a saving of roughly £48,840 — versus giving up perhaps £16,600 in forgone savings interest at 3% over the same period. Because mortgage interest saved is effectively tax-free (you're not liable for tax on interest you never earned), offsetting is often more valuable than a taxable savings account, especially for higher and additional-rate taxpayers. Run your own numbers above.

Do I pay tax on the interest I save with an offset mortgage?

No. Because you never actually earn interest on the offset savings — you simply avoid paying mortgage interest on an equivalent amount — there's no taxable savings interest to declare on that portion. This is the key attraction for higher-rate and additional-rate taxpayers, who would otherwise pay 40% or 45% income tax on ordinary savings interest above their Personal Savings Allowance.

Does an offset mortgage reduce my monthly payment?

Typically no — like most UK mortgages, your contractual monthly payment usually stays the same, and the benefit shows up as a shorter mortgage term and less total interest, because more of each fixed payment goes toward principal once the offset reduces the interest charged. Some lenders offer a version where you can instead choose to reduce the monthly payment — check your specific product.

Can I access my offset savings whenever I want?

Generally yes — offset savings are usually held in an easy-access linked savings or current account, so you can withdraw the money as normal. The trade-off is that withdrawing reduces the amount offset against your mortgage, so your interest saving (and therefore how much extra goes to principal each month) falls while your balance is lower.

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