UK Offset Mortgage Calculator
See how constant linked savings can reduce mortgage interest while you keep the original modeled payment. Savings remain separate cash; they are not treated as a lump-sum repayment.
Rule year: 2026/27 · GBP · Sources checked
Mortgage interest with constant offset savings
Constant eligible savings, rate and original principal-and-interest payment; monthly rather than daily interest. No offset-product fee/rate premium, savings interest, taxation, changing deposits/withdrawals, payment-reduction mode, ERC or lender rounding. Savings above the mortgage balance cannot create negative mortgage interest or repay principal automatically.
For informational purposes only. This estimate is not financial advice, a tax return, a payroll calculation or a lender decision. See the supported circumstances and exclusions below.
How this calculator works
An offset arrangement can charge mortgage interest only on the balance not covered by eligible linked savings. With the same original repayment maintained, less interest leaves more of each payment for principal and can shorten the term. This calculator simulates that path month by month and compares interest with the same loan without offset savings. Savings remain a separate asset, and interest stops falling once savings fully cover the balance.
Formula and rules
Monthly interest = max(0, mortgage balance − linked savings) × annual rate / 1200. Keep the original no-offset payment; reduce principal by payment minus interest until payoff.
Assumptions and limitations
Constant eligible savings, rate and original principal-and-interest payment; monthly rather than daily interest. No offset-product fee/rate premium, savings interest, taxation, changing deposits/withdrawals, payment-reduction mode, ERC or lender rounding. Savings above the mortgage balance cannot create negative mortgage interest or repay principal automatically.
Worked example
With £120,000 at 0% over 120 months, £20,000 offset savings do not reduce interest further: both paths pay £1,000/month for 120 months and interest is zero. At a positive mortgage rate, the monthly simulation can save interest and time.
- Mortgage interest with constant offset savings
- £0.00
- Interest avoided versus no offset
- £0.00
- Offset mortgage payoff time
- 120 months
- Months saved
- 0 months
Official sources and review
Reviewed against the sources below on 2026-10-07. Rates are held in versioned rule modules. Versioned rules, official source review and year-specific calculation tests.
- MoneyHelper: mortgage types explained ↗
Mortgage features and repayment structure; offset assumptions require actual product terms.
- MoneyHelper: mortgage overpayments ↗
Lenders set overpayment allowances and early repayment charges. Contract terms, not a universal 10%, govern.
Common questions
Are the savings used to repay my loan?
No. They stay separately held in the model. Only the reduced interest charge changes how quickly regular payments reduce principal.
What if I withdraw the savings?
The constant-offset assumption no longer holds. Recalculate with an appropriate scenario or use the lender’s daily balance records.
Can I compare this directly with a savings account return?
Not here. Lost savings interest, tax, offset-rate premiums and fees require a separate comparison; the displayed result is mortgage interest only.