Property
Offset Mortgage Calculator
Estimate whether using savings to offset your mortgage could reduce interest compared with keeping savings separately.
Inputs
Results
Useful next checks
- Check the inputs before relying on the result.
- Try a second scenario to compare outcomes.
- Read the guide below for context.
Intro
Use this offset mortgage calculator to compare a standard mortgage with an offset mortgage. It estimates mortgage interest, savings interest after tax, fees, and the overall difference for your chosen comparison period.
What this calculator does
The calculator compares:
- A standard repayment mortgage while savings earn separate interest.
- An offset mortgage where savings reduce the interest-bearing mortgage balance.
- Mortgage product fees.
- Savings interest after a simple tax-band assumption.
- A yearly cumulative cost comparison.
How it works
For the standard mortgage, the calculator estimates monthly repayment interest on the full mortgage balance. It also estimates separate savings interest and reduces that interest by the selected tax band.
For the offset mortgage, the savings balance is set against the mortgage balance each month. Interest is charged only on:
Mortgage balance - offset savings
The calculator then compares standard mortgage interest plus fees, minus savings interest, against offset mortgage interest plus fees.
Example calculation
Suppose you compare:
- 200,000 mortgage balance.
- 25 years remaining.
- 5% standard mortgage rate.
- 5.25% offset mortgage rate.
- 40,000 savings.
- 4% savings rate for a basic-rate taxpayer.
- 999 offset product fee.
The offset route may reduce mortgage interest, but the result depends on whether the saved interest outweighs the higher rate, lower savings interest, and product fee.
How to use the result
Use the result as a first-pass comparison before reviewing actual mortgage illustrations. If the offset result is close to the standard result, product fees, flexible access to savings, repayment type, and future rate changes may matter more than the headline saving.
Assumptions and limitations
- The calculator assumes repayment mortgages, fixed rates, fixed savings rates, and monthly calculations.
- Offset savings do not earn separate savings interest.
- Savings tax is simplified to the selected marginal tax rate and does not model the personal savings allowance.
- It does not assess eligibility, overpayment limits, early repayment charges, fees added to the loan, or product suitability.
- Results are estimates and not mortgage advice.
FAQs
- Does an offset mortgage always save money? No. A higher offset rate, fees, low savings balance, or strong separate savings rate can make the standard mortgage cheaper.
- Can I include regular savings? Yes. Use monthly savings added to model a growing savings balance over the comparison period.
- Does this show the full mortgage term? It compares for the number of years you enter, capped at the remaining mortgage term.
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Frequently asked questions
Does an offset mortgage pay savings interest?
Usually no. The calculator treats offset savings as reducing mortgage interest instead of earning separate savings interest.
Does this include the personal savings allowance?
No. It uses the selected marginal tax rate as a simple savings-interest tax assumption.
Why might the offset mortgage be worse?
Higher offset rates, product fees, low savings balances, or strong separate savings interest can make the standard route cheaper.