Best offset mortgage deals

What is an offset mortgage?

An offset mortgage means your savings account is linked directly to your mortgage. So instead of earning interest on your savings, the money in your savings account is used to reduce the amount of your mortgage that interest is charged on.

Here’s an example. Let’s say you’ve got a mortgage of £200,000 and savings of £20,000. With your offset mortgage, you’d only pay interest on £180,000. Your savings don’t pay off your mortgage, they lower the amount you pay interest on.

You can  dip into your savings if you need to, but the more you have in the account, the more you save on mortgage interest.

Because you’re not earning interest on your savings (you’re just avoiding mortgage interest), there’s no tax to pay on the benefit, which can be helpful for higher rate taxpayers.

While repayment offset deals are more common, you can get an interest-only offset mortgage deal as well.

Why choose an offset mortgage?

There are a few reasons you might want an offset mortgage:

• You could clear your mortgage faster by reducing the amount of interest you pay.
• You’ve still got your savings if you need them. still have access to your savings if you need them.
• You don’t pax on the savings offsetting your mortgage.
• They can be particularly useful if you’re self-employed, have irregular income, or want the flexibility to save while keeping your monthly payments manageable.

Some lenders will give you the choice of using your offset savings to:

• Reduce your monthly mortgage payments
• Keep payments the same and shorten your mortgage term

This flexibility can be great if your income varies or you want to pay off your mortgage early.

Who do offset mortgages work for?

Offset mortgages are most useful for people who have a decent amount of savings and want to make those savings work harder. If you’ve got money sitting in a low interest savings account, you could be better off using it to reduce your mortgage interest instead.

They can also suit families who want to help younger relatives get on the property ladder. Some lenders offer family offset mortgages, where a parent or grandparent puts their savings into an offset account to help reduce the borrower’s interest payments.

Who can get an offset mortgage?

You’ll need to meet a lender’s eligibility checks if you want an offset mortgage. They’ll want to know you can afford the repayments, even without the savings helping.

To meet a lenders eligibility criteria, you’ll normally need to provide:

• 3–6 months of payslips
• Recent bank statements
• Your monthly outgoings
• Your credit history
• Information about your deposit or home equity

If you're self-employed, tax returns or business accounts will also be needed.

How to find the best offset mortgage deals

There aren’t as many offset mortgages available as there are other types of mortgages, such as fixed rate or variable, so it’s important to shop around. You can also use our online mortgage finder to check the latest offset mortgage deals from across the market.

Our expert mortgage advisers can talk you through the pros and cons and help you understand whether this type of mortgage is right for you. If it is, we’ll support you all the way through the application process.

We work with over 90 lenders and can compare what’s out there to find a deal that matches your circumstances. Some lenders offer offset deals with fixed rates, others with variable or tracker rates, so it’s worth looking at all the options.

Making repayments on an offset mortgage

Your monthly repayments all depend on what type of offset mortgage you choose. Some deals reduce your monthly payment based on how much you have in your savings account, while others keep your payments the same but shorten the length of your mortgage term.

You can usually switch between these options, or add to or withdraw from your savings account, depending on your lender’s terms. But remember, taking money out of your offset account will increase the amount of interest you pay on your mortgage.