Offset Mortgage Calculator

An offset mortgage links your savings account to your mortgage. The savings balance is offset against the mortgage balance, so you only pay interest on the difference. For example, with a £200,000 mortgage and £30,000 in savings, you pay interest on £170,000. The savings do not earn interest, but the tax-free mortgage interest saving is equivalent to earning interest on savings.

For higher-rate taxpayers, offsetting is particularly beneficial because the equivalent gross savings rate would need to be much higher to match. If your mortgage rate is 4.5%, a 40% taxpayer would need a savings account paying 7.5% gross (4.5% ÷ 0.60) to match the offset benefit.

This calculator compares a standard mortgage with an offset mortgage. Enter your mortgage details and savings balance to see the interest saved each year, the reduction in mortgage term and the equivalent gross savings rate you would need to beat the offset benefit at your tax rate.

What is an offset mortgage? Link mortgage to savings account at same lender. Savings 'offset' mortgage balance — interest only paid on net amount. Sample: £200,000 mortgage + £50,000 in offset savings = interest charged on £150,000 (saves interest on £50,000). No interest earned on savings (instead saves mortgage interest at much higher rate). Tax benefit: savings interest effectively at mortgage rate, tax-free (vs taxable savings interest at lower rate).

UK offset mortgage providers 2026. Limited UK availability since 2008 crisis. Major: Yorkshire Building Society (largest offset specialist), Coventry BS (Coventry Building Society), Family BS (Family Building Society), Scottish Widows Bank (now Lloyds). Rate premium: typically 0.2-0.5% above equivalent standard mortgage. Sample 2026: standard 4.5% vs offset 4.8% — but interest saving from offset usually exceeds rate premium for offset balance £30k+.

Tax advantage of offset. Savings interest taxable above Personal Savings Allowance (£1,000 basic-rate, £500 higher, £0 additional). £50k savings at 4.5%: £2,250 interest = £450 tax for higher-rate taxpayer above PSA. Offset mortgage £50k savings instead saves £50k × 4.8% = £2,400 mortgage interest TAX-FREE. Effective benefit £2,400 vs £1,800 net taxable savings = £600/year additional benefit for higher-rate taxpayer. Bigger benefit for additional-rate (45%) taxpayers.

When offset mortgage makes sense. Higher-rate or additional-rate taxpayer with savings >£10-£20k. Self-employed with fluctuating income (savings act as buffer + reduce interest). Anticipating large savings build-up (inheritance, business sale, bonuses). Want mortgage flexibility — overpay AND withdraw at will. Doesn't suit: those with no savings (offset benefit zero); those committed to ISA-first investing; those needing investment growth above mortgage rate.

Offset alternatives — compare against. Standard mortgage + max ISA: ISA grows tax-free (5-7% S&S returns). Better long-term IF investments outperform mortgage rate (commonly do over 10+ years). Standard mortgage + cash savings: simpler, no tax advantage, savings interest taxed. Premium Bonds: 4.15% tax-free, equivalent to offset benefit but capital tied. Offset mortgage benefit: liquidity (offsets can be accessed instantly) + saves at HIGHER rate (mortgage > savings rates). Best for short-term savings buffer pre-investment.