Offset Mortgage Calculator
See how your savings can reduce mortgage interest in the UK
UK Mortgage
Offset Savings
Mortgage Details
Outstanding mortgage balance
Current mortgage rate
Remaining years
Offset Account
Amount in offset account
Additional savings per month
100% Offset
Full savings offset
50% Partial
Half savings offset
Your Tax Bracket (for equivalent savings comparison)
Used to calculate tax-equivalent savings rate
Total Interest Savings Over Term
£0
You could save 0 years off your mortgage term
Standard Monthly Payment
£0
Without offset
Offset Monthly Payment
£0
Same payment, faster payoff
Effective Balance
£0
Interest charged on
Tax-Equivalent Rate
0%
Savings account would need
How Your Offset Works
Mortgage
£250.000
Offset Savings
£40.000
Effective Balance
£210.000
Tax-Equivalent Savings Rate by Tax Bracket
Basic Rate (20%)
0%
Gross rate needed
Higher Rate (40%)
0%
Gross rate needed
Additional (45%)
0%
Gross rate needed
Standard vs Offset Mortgage
Standard Mortgage
Monthly Payment
£0
Total Interest
£0
Total Repayment
£0
Mortgage Term
25 years
VS
Offset Mortgage
Monthly Payment
£0
Total Interest
£0
Total Repayment
£0
Reduced Term
0 years
Cost Breakdown with Offset
Total
£0
Principal
£0
Interest Paid
£0
Interest Saved
£0
Year-by-Year Comparison
| Year | Standard Balance | Standard Interest | Offset Balance | Offset Interest | Cumulative Savings |
|---|
Offset Mortgage Formula
Effective Balance = Mortgage Balance - (Savings × Offset %)
Monthly Interest (Offset) = Effective Balance × (Annual Rate / 12)
Tax-Equivalent Rate = Mortgage Rate / (1 - Tax Rate)
Example: 5.25% / (1 - 0.40) = 8.75% gross rate for 40% taxpayer
Monthly Payment = P × [r(1+r)^n] / [(1+r)^n - 1]
Where: P = Principal, r = Monthly rate, n = Total months
Understanding UK Offset Mortgages
How Offset Works
Your savings are linked to your mortgage but kept in a separate account. Instead of earning interest on savings (which is taxable), you reduce the mortgage balance you pay interest on, effectively giving you a tax-free return equal to your mortgage rate.
Tax Efficiency
For a 40% taxpayer with a 5% mortgage, offsetting is equivalent to earning 8.33% gross on a savings account. Higher-rate taxpayers benefit most, as they would pay more tax on savings interest.
Flexibility
Unlike overpayments, you can access your offset savings anytime without penalty. This makes it ideal for emergency funds or irregular income. Your mortgage balance adjusts automatically as your savings change.
Choosing Your Benefit
You can take the offset benefit as reduced monthly payments (same term, lower costs) or keep payments the same to pay off your mortgage faster. Some lenders offer a combination of both options.