Offset Mortgage Calculator
An offset mortgage links your savings to your mortgage balance, so you only pay interest on the difference between the two. Our offset mortgage calculator compares this against the alternative — keeping your savings in a normal account and earning interest on them separately — so you can see which genuinely leaves you better off.
Offset Mortgage Calculator
Compare an offset mortgage against keeping your savings in a separate account earning interest.
How Offsetting Actually Saves You Money
If you have a £220,000 mortgage and £30,000 in savings linked to an offset account, you only pay interest on £190,000. Your savings earn no interest themselves in this arrangement, but the interest you avoid paying on the mortgage is effectively your return — and because mortgage interest is not taxed, this can be more valuable than savings interest, which is taxable above your Personal Savings Allowance for higher earners. This is precisely why offset mortgages are particularly attractive to higher and additional rate taxpayers.
Why Tax Band Matters So Much Here
A basic rate taxpayer with a modest savings pot might find a competitive standard savings account narrowly beats offsetting, once you account for their Personal Savings Allowance covering most or all of the interest tax-free. A higher rate taxpayer, especially one with savings above their reduced Personal Savings Allowance, often finds offsetting wins clearly, because avoiding mortgage interest is effectively tax-free while savings interest above the allowance is taxed at 40% or more. This calculator asks for your tax band specifically because the right answer genuinely depends on it.
The Trade-Off: Access and Rate
Offset mortgages typically carry a slightly higher headline interest rate than an equivalent standard mortgage, to compensate the lender for the flexibility offered. You also keep your savings accessible in most offset arrangements — unlike overpaying your mortgage directly, which is far harder to claw back — making offsetting attractive if you want to retain an emergency fund while still reducing your effective mortgage cost.
A Worked Example
On a £220,000 mortgage at 4.8% over 25 years with £30,000 offset, the reduced effective balance of £190,000 could save tens of thousands of pounds in interest over the full term compared with paying interest on the full £220,000, while leaving the £30,000 fully accessible. Compare that against the same £30,000 sitting in a savings account earning, say, 4.2% for a higher rate taxpayer — after 40% tax, the net return drops to roughly 2.5%, which is usually well below the mortgage rate being avoided through offsetting.
Who Tends to Benefit Most from Offsetting
Offset mortgages particularly suit people with irregular or lumpy cash flow — self-employed business owners who hold profits before drawing them down, or anyone who regularly builds up a cash buffer between bonus payments. Rather than choosing between “pay down the mortgage” and “keep cash accessible”, an offset structure effectively lets you do both simultaneously, since money sitting in the linked account continues to reduce your effective mortgage interest for as long as it stays there, even if you withdraw and redeposit it repeatedly over the year. This flexibility is the core appeal, and it is why offset products remain popular with higher earners and business owners even though they are a smaller niche of the overall mortgage market compared with standard fixed and tracker deals.
It is worth checking whether your lender offers a “flexible offset” facility, where multiple linked savings and current accounts can all count towards reducing your effective mortgage balance, rather than a single dedicated savings pot. Some providers also allow family members — parents helping a first-time buyer, for example — to link their own savings to someone else’s offset mortgage without gifting the money outright, which can be a useful way of supporting a purchase while keeping the underlying capital accessible to the person who saved it.
Frequently Asked Questions
Do I lose interest on my savings with an offset mortgage?
Typically yes, in the classic offset structure — your savings earn no interest, but you avoid paying mortgage interest on that amount instead, which is often a bigger effective benefit depending on your tax position.
Can I still access my offset savings?
Usually yes, offset savings generally remain accessible, unlike overpayments made directly to the mortgage, which is one of the main appeals of this structure over simple overpaying.
Is an offset mortgage only worth it for higher earners?
It tends to make the strongest case for higher and additional rate taxpayers, or anyone with savings above their Personal Savings Allowance, but it can still be worthwhile for basic rate taxpayers with larger savings balances.
Do offset mortgages cost more overall?
The headline rate is often slightly higher than a standard equivalent mortgage, so the benefit depends on having a meaningful savings balance to offset — with little or no savings to link, a standard mortgage at a lower rate may work out cheaper.