Mortgage Offset

Help your clients put their money to harder work with our mortgage Offset facility.

How offset works

Graphic of Mortgage figures

Our mortgage Offset facility is simple

A savings account (called an Offset Saver Account) is set up alongside your client's mortgage.

The money in the savings account is then offset against the mortgage. So, while your client won’t earn any interest on their savings, in effect they won't be charged any interest on the same amount of their mortgage.

Offset options

Your clients can benefit from Offset in one of two ways:

  • With Reduced Term, while the monthly mortgage repayments stay the same each month (subject to changes in mortgage rates), the amount of mortgage interest your client needs to pay is lower due to their Offset savings. More of their monthly mortgage payment is therefore used to repay the balance of the loan which effectively means they’re making mortgage overpayments each month. This could allow your client to pay off their mortgage sooner and save thousands of pounds in interest.

    This example illustrates how a client could benefit from the Reduced Term option.

    Example based on a:

    • £200,000 mortgage over 25 years on a repayment basis. A product fee of £999 has also been added to this, giving an overall borrowing amount of £200,999.
    • 2 year fixed rate of 3.49%, reverting to a standard variable rate of 3.99% after two years
    • the overall cost for comparison is 4.0% APR
    • £25,000 lump sum in the Offset Saver Account from completion. The completion date in this example is 15 January 2014
    • an additional £100 regular monthly payment to the Offset Saver Account
    • these are example interest rates and not necessarily the current rates offered by Scottish Widows Bank.

    By offsetting, the term of the mortgage would be reduced by 3 years and 5 months, and £46,440 is saved in interest payments. The reduction of the mortgage term is illustrated in the diagram below. In addition, there would be enough savings in the Offset Saver Account to repay the mortgage balance 7 years and 1 month early.

    Offset option 1 reduced term graph
  • With this option, the mortgage term remains unchanged, and instead the monthly mortgage interest payment is reduced. The offset benefit your client earns each month from the savings in their Offset Saver Account is in effect used to reduce how much mortgage interest they’ll pay the following month.

    This option could offer your client more disposable income each month. And, in addition to reducing their monthly payment, they could also save thousands of pounds in interest payments during the term of your mortgage.

    We collect mortgage payments one month in arrears, so it's important to remember the savings balance in one month will reduce the mortgage payment your client makes two months later. For example, the offset benefit accrued in April would reduce the mortgage payment for May, which would be collected on 1 June.

    This example illustrates how the Reduced Monthly Payment Offset option works.

    Example based on a:

    • £200,000 mortgage over 25 years on a repayment basis. A product fee of £999 has also been added to this, giving an overall borrowing amount of £200,999.
    • 2 year fixed rate of 3.49%, reverting to a standard variable rate of 3.99% after two years.
    • the overall cost for comparison is 4.0% APR.
    • £25,000 lump sum in the Offset Saver Account from completion. The completion date in this example is 15 January 2014.
    • these are example interest rates and not necessarily the current rates offered by Scottish Widows Bank.

    The column ‘Total mortgage payment after offset benefit applied’ shows how the Reduced Monthly Payment option reduces the monthly mortgage payments. In total, £23,673 would be saved in interest payments during the mortgage term, and there would also be a sufficient Offset Saver Account balance to repay the mortgage balance 24 months early.

    Month Number of days Mortgage payment date Offset benefit earned Offset benefit applied Mortgage payment before offset benefit applied* Mortgage payment after offset benefit applied**
    15 Jan to 28 Feb 45 01.03.13 £107.57 £0.00 £1,332.06 £1,332.06
    March 31 01.04.13 £74.10 £107.57 £1,005.30 £897.73
    April 30 01.05.13 £71.71 £74.10 £1,005.30 £931.20
    May 31 01.06.13 £74.10 £71.71 £1,005.30 £933.59
    June 30 01.07.13 £71.71 £74.10 £1,005.30 £931.20
    July 31 01.08.13 £74.10 £71.71 £1,005.30 £933.59

    * The first mortgage payment is bigger than the subsequent normal monthly mortgage payments because there is more mortgage interest due as the mortgage starts part way through the month.

    ** The offset benefit will accrue from the day your client deposits funds into their Offset Saver Account and each month it will be applied to the mortgage payment for the following month.

    Try our Offset calculator  to see the benefits of offsetting.

Key features

The Offset Saver Account facility can be used on our mortgages if the eligibility criteria are met.

Features

Eligibility
  • The minimum balance of an Offset Saver Account is £100.
  • The maximum balance of an Offset Saver Account is £1 million.
Product choice
  • The Offset facility is available with all our current mortgage products.
  • If your client’s mortgage is made up of more than one product and/or payment type, please advise which part they would like to offset against.
  • If part repayment and part interest only is chosen, clients can only offset against one portion.
How interest is calculated
  • Interest is calculated daily on the mortgage account balance less the Offset Saver Account balance, and applied monthly to the mortgage account.
Offset Saver Account
  • The Offset Saver Account must be opened in the same name(s) as the mortgage account.
  • Transfers to and from the Offset Saver Account will be made by electronic funds transfer to/from a designated personal bank or building society account.
Offset benefit
  • With reduced term, monthly mortgage payments remain at the same level until an interest rate change, meaning the term could be decreased.
  • With reduced monthly payment, monthly mortgage payments are reduced and can fluctuate each month.
  • No credit interest will be paid to Offset Saver Accounts if the balance exceeds the mortgage debt.
Mortgage term
  • The original term of the mortgage is unchanged.

Apply for Offset

See how to add Offset to a new mortgage:

How to apply

Add Offset to an existing mortgage:

If your client already has a Scottish Widows Bank mortgage you can add Offset by simply completing the Offset Application Form (PDF 137KB) and sending to the address at the end of the form.

Whichever option you choose, please read our Guide to Offsetting (PDF 632KB)

Show your clients how offset works

Offset case studies

Offset is an option for more people than you might think. Read through these case studies to see how it adds up for people with savings, professionals who receive bonuses, entrepreneurs who need fast access to their savings and the self-employed who have a fluctuating income and might be saving for a tax bill.

Offset calculator

Use our calculator to demonstrate the benefits of Offset to your clients.

Use our Offset calculator

Answers to your client's questions

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