What Is an Offset Mortgage and Is It Right for You?
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.
FAQs
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Yes — your savings remain fully accessible. If you withdraw them, your interest charges increase accordingly.
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No — because you’re not earning interest, there’s no tax to pay. Instead, you're saving mortgage interest.
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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.
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Yes — most offset mortgages offer standard overpayment options, and some allow flexible payment holidays or drawdowns.
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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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HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.
For specialist tax advice, please refer to an accountant or tax specialist.
APPROVED BY THE OPENWORK PARTNERSHIP ON 14/07/2025