Offset Mortgage Calculator

An offset mortgage sets your savings against the mortgage balance, so you pay interest only on the difference. The savings earn nothing directly, but they avoid interest at the mortgage rate — which is almost always higher than a deposit account pays, and untaxed.

Because the benefit is tax-free in most systems, offsetting frequently wins even where the savings rate looks competitive. The money also stays accessible, which is what separates offsetting from overpaying.

The comparison

Interest avoided = savings held × mortgage rate. Interest earned = savings × savings rate × (1 − tax rate). The advantage of offsetting is the difference, and it is positive whenever the mortgage rate exceeds the after-tax savings rate.

Worked example

With 30,000 offset against a 250,000 mortgage at 6.5%, you avoid 1,950 of interest a year. The same 30,000 in a 3% account taxed at 20% earns 720 after tax. Offsetting is 1,230 a year better, and the benefit is equivalent to a tax-free savings rate of 6.5%.

Access is the real advantage

Unlike an overpayment, offset savings can be withdrawn. That makes an offset account a good home for an emergency fund: it works as hard as an overpayment while remaining available, which is exactly what an emergency fund needs to be.

Frequently asked questions