Offset mortgage calculator
An offset mortgage links your savings to your mortgage so you pay interest only on the balance minus your savings. Put £40,000 against a £250,000 mortgage at 4.5% and you are charged interest on £210,000, saving about £150 a month, roughly £1,800 a year. Your savings earn no interest, but they save you mortgage interest at the mortgage rate, tax-free, which is why offset works best for higher-rate taxpayers with meaningful savings who want to keep the money accessible.
How offset saves you money
With an offset mortgage your savings are not spent and not locked away; they sit in a linked account and reduce the balance the lender charges interest on. You still owe the full mortgage, but you are charged as if the savings had been knocked off it. The interest you save each year is simply:
Annual interest saved = savings offset × mortgage rate
Worked example
A £250,000 mortgage at 4.5% would cost about £938 in interest in the first month. Link £40,000 of savings and you are charged on £210,000 instead, about £788 that month, a saving of roughly £150 a month or £1,800 a year. Because the savings earn no taxable interest, the effective return on that £40,000 is 4.5% gross and tax-free. You can still spend the savings if you need to, which pauses the benefit for that time.
Interest saved by offset amount
On a £250,000 mortgage at 4.5%.
| Savings linked | Interest saved a year |
|---|---|
| £10,000 | £450 |
| £25,000 | £1,125 |
| £40,000 | £1,800 |
| £60,000 | £2,700 |
Simplified illustration at a rate assumed constant; on a repayment mortgage the exact saving changes as the balance falls, and you can take the benefit as a lower payment or a shorter term. Indicative only, not a quote or advice. Last reviewed 24 July 2026.
Check it for real
Run your own figures and get matched
The example above shows the method. Use this offset calculator to run your own balance, savings and rate, and if you choose, be introduced to a regulated broker who can tell you whether an offset deal beats a standard rate for you. Provided by our partner Propillo. Information, not advice, and no obligation.
Common questions
How does an offset mortgage work?
Your savings are linked to your mortgage rather than earning interest of their own. The lender charges mortgage interest only on the balance minus your linked savings. Put £40,000 of savings against a £250,000 mortgage and you pay interest as if you owed £210,000. You keep full access to the savings; the trade-off is that they earn no interest while linked.
Is an offset mortgage worth it?
It works best if you hold meaningful savings and are a higher-rate taxpayer. Because your savings save you mortgage interest at the mortgage rate, tax-free, the effective return equals the mortgage rate gross, which can beat a taxed savings account. If you hold little in savings, or the offset rate is much higher than a normal mortgage, the benefit shrinks. Compare the offset rate against a standard rate plus a taxed savings account.
Offset or just overpay?
Overpaying reduces the balance permanently and usually comes on a cheaper rate, but the money is gone unless the lender allows drawdown. Offset keeps your savings fully accessible for emergencies while still cutting interest. If you value the access, or your savings level moves around, offset suits better. If you are certain you will not need the money, overpaying a cheaper mortgage often wins.
Do I lose the interest on my savings?
Yes, linked savings earn no credit interest. But they save you mortgage interest at the mortgage rate, which is normally higher than a savings rate and, crucially, is not taxed. For a higher-rate taxpayer that tax-free saving is the main appeal. You can usually still withdraw the savings at any time, which reduces the offset benefit for that period.
Comparing options? See the overpayment calculator and how much can I borrow.
Founder, MortgageExplained
Adam spent nearly a decade as a mortgage adviser at Just Mortgages, with further experience in commercial finance. He is CeMAP and CF qualified. He built MortgageExplained to do one thing well: explain mortgages in plain English, then introduce you to a regulated broker when you are ready. Every page is written and reviewed by Adam.
Last reviewed: 24 July 2026