Offset mortgage calculator
There is no fixed government rate for an offset mortgage; the saving depends on the balance, rate and linked savings entered. On a £220,000 mortgage at 4.50% over 25 years, offsetting £30,000 of savings is estimated to save £51,358 in interest and clear the loan about 3 years 5 months early, assuming a level payment and a constant offset balance.
How does an offset mortgage work?
An offset mortgage links a savings pot to the loan. Instead of earning interest on the savings, the linked amount avoids interest on the same amount of mortgage, because the lender charges interest only on the balance left after the offset. The saving is made at the mortgage rate and is free of tax, unlike ordinary savings interest, which is taxed once it passes the Personal Savings Allowance under gov.uk's rules.
This tool holds the monthly payment at the normal repayment level throughout. Because part of each payment no longer needs to cover interest, more of it pays down capital, so the balance drops faster and the mortgage is projected to end early. The larger the savings and the higher the rate, the larger the estimated effect.
What would this look like on my mortgage?
On a £220,000 mortgage at 4.50% over 25 years, the normal payment is estimated at £1,222.83 a month. Offsetting £30,000 of savings against it means interest is charged only on the balance minus that amount. Over the loan this comes to an estimated £95,491 in interest rather than £146,849, a saving of about £51,358. On these assumptions the mortgage is projected to clear in 21 years 7 months instead of 25 years.
Common questions
How does an offset mortgage work?
Your savings sit in a linked account and are set against the mortgage balance. Interest is charged only on the balance minus the savings, so the debt costs less each month. On the example, offsetting £30,000 saves about £51,358 in interest and clears the loan 3 years 5 months early.
Do I lose access to my savings?
No. Offset savings stay yours and you can withdraw them, which is the main appeal over simply overpaying. If you take money out, the offset shrinks and the interest saving falls, but the flexibility is why some people accept a slightly higher headline rate.
How does offsetting compare with earning interest on the savings?
The offset avoids paying interest at the mortgage rate, with no tax charged on that saving. Savings interest earned outside the mortgage is taxed once it passes the Personal Savings Allowance, under gov.uk's rules on tax-free interest. Which arrangement leaves more in hand depends on the mortgage rate, the savings rate, and the saver's tax position, none of which this calculator can see.
Does the monthly payment change?
This calculator holds the payment at the same level as a normal repayment mortgage. The interest no longer paid is redirected into capital, so the balance falls faster and the term shortens. Some lenders instead let the payment fall and keep the full term.
What are the drawbacks?
Offset deals sometimes carry a slightly higher rate than a plain mortgage, and the effect only shows where meaningful savings are held. With little in the linked account the offset does almost nothing, so the assumptions behind this estimate matter as much as the result.
What would this look like on my mortgage?
On a £220,000 mortgage at 4.50% over 25 years, the normal payment is estimated at £1,222.83 a month. Offsetting £30,000 of savings means interest is charged only on the balance minus that amount. Over the loan this comes to an estimated £95,491 in interest rather than £146,849, a saving of about £51,358, with the mortgage estimated to clear in 21 years 7 months instead of 25 years, assuming a constant offset balance throughout.
Sources & Rate Verification
Rates verified against official statutory guidance on 6 September 2026.