What Is an Offset Mortgage and Is It Right for You?

David Walsh

DIRECTOR AND MORTGAGE ADVISER

Specialist broker for high-earning professionals and complex income cases.

Offset mortgages are an increasingly popular option for high earners and self-employed professionals who want to make their savings work harder.

But what exactly is an offset mortgage, how does it work, and is it a good fit for your circumstances? In this post, we’ll break it all down in plain English.

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What Is an Offset Mortgage?

An offset mortgage links your mortgage account with one or more savings accounts. Rather than earning interest on your savings, the money is offset against your mortgage balance — reducing the amount of interest you’re charged.

You still make monthly payments, but because the lender charges interest on a smaller balance, more of your payment goes toward reducing the loan.

How Does an Offset Mortgage Work in Practice?

Let’s say:

• Your mortgage is £1,000,000

• You have £300,000 in savings in an offset account

The lender only charges interest on £700,000 — effectively reducing your interest costs, without locking away your cash.

You can either:

• Reduce your monthly payments while keeping the same term

• Keep payments the same and pay off your mortgage sooner

And importantly, your savings stay accessible — you can withdraw them at any time.

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Who Should Consider an Offset Mortgage?

Offset mortgages aren’t for everyone, but they can be ideal if you:

• Have significant savings

• Receive bonuses or irregular income you want to park efficiently

• Are self-employed and retain cash for tax or business expenses

• Are paid gross of tax

• Want flexibility and control over how your mortgage works

• Prefer to avoid earning taxable interest on savings

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Pros and Cons of Offset Mortgages

Pros:

• Save interest instead of earning taxable savings income

• Retain access to your savings at all times

• Potential to repay your mortgage faster

• Useful for managing cash flow if income is uneven

Cons:

• Interest rates may be slightly higher than standard mortgages

• You’ll miss out on savings interest (but tax and mortgage savings often outweigh this)

• Fewer lenders offer offset products — especially at high LTVs

Are Offset Mortgages Available for High-Value Borrowing?

Yes — some lenders offer large loan offset mortgages for clients borrowing £750k–£2m+, particularly where:

• You have a large deposit or equity

• You’re retaining significant liquid savings

• You want flexibility without committing to a fixed rate

Offset options can be especially powerful for those with:

• Deferred bonuses or RSU vesting

• Investment portfolios being liquidated

• Business reserves or retained earnings

• High cash income with low tax liabilities

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Conclusion: Should You Consider an Offset Mortgage?

If you hold large savings or your income comes in unevenly, an offset mortgage can be a powerful tool — helping you reduce interest, stay flexible, and avoid unnecessary tax.

Wondering if offset is the right option for you?
We’ll assess your full financial picture and advise whether an offset mortgage could work for your situation.

Request your fee free mortgage consultation today. No obligation, just sound advice.

Complete Enquiry Form

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FAQs

• Can I still access my savings in an offset mortgage?

  Yes — your savings remain fully accessible. If you withdraw them, your interest charges increase accordingly.

• Do I pay tax on savings in an offset account?

  No — because you’re not earning interest, there’s no tax to pay. Instead, you're saving mortgage interest.

• Do offset mortgages cost more?

  The interest rate is sometimes slightly higher, but the overall savings often outweigh this — especially for higher-rate taxpayers or those with cash earning no interest.

• Can I overpay with an offset mortgage?

  Yes — most offset mortgages offer standard overpayment options, and some allow flexible payment holidays or drawdowns.

• Is an offset mortgage good for self-employed borrowers?

  Absolutely. Many self-employed clients use offset mortgages to park funds set aside for tax, allowing those savings to reduce interest while staying accessible.

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YOUR HOME MAY BE REPOSESSED IF YOU DON’T KEEP UP REPAYMENTS ON YOUR MORTGAGE

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For specialist tax advice, please refer to an accountant or tax specialist.

APPROVED BY THE OPENWORK PARTNERSHIP ON 14/07/2025