What do you want to know about offsetting?
How offset works
The way the offset facility on our mortgages works is simple. A savings account (Offset Saver Account) is set up alongside your mortgage.
The offset facility is available on all 2 year fixed rates and all variable rates.
The money in your savings account is ‘offset’ against your mortgage. This means that you won’t earn any interest on your savings, but you won’t be charged any interest on the same amount of your mortgage – as shown by the diagram below.
This could potentially save you thousands of pounds in interest and you can benefit from this in one of two ways:
- Paying off your mortgage early (we call this reduced term), or;
- Reducing your monthly mortgage payment.
Try our offset calculator to see how you could benefit.
Option 1 - Reduced term
If you choose this option, your monthly mortgage payments will always stay the same – subject to changes in interest rates. However, because the savings in your Offset Saver Account are offsetting against your mortgage, more of your monthly payment is used to repay the balance of your mortgage – which makes it possible for you to pay off your mortgage sooner. And you could save thousands in interest payments too.
The table below gives a specific example of the offsetting benefit reduced term could help you achieve.
| Without offset | With offset | |
|---|---|---|
| Savings offset against mortgage | £15,000 | |
| Monthly mortgage payment | £824.44 | £824.44 |
| Total amount payable | £247,284.27 | £208,583.32 |
| Mortgage Interest saved | £38,763.09 | |
| Mortgage term reduced by | 3 years 11 months |
Illustration based on £130,000 repayment mortgage with a variable rate of 5.75% and £15,000 in an Offset Saver Account over a 25 year period. Also includes a £999 product fee and £25 CHAPS fee. This illustration is based on an example interest rate and is not necessarily the current rate offered by Scottish Widows Bank. The overall cost for comparison is 5.9% APR.
Option 2 - Reduced monthly payment
If you choose this option, your monthly mortgage payment could be reduced, giving you more disposable income. This is because the savings in your Offset Saver Account are used to reduce how much mortgage interest you would normally pay each month. The term of your mortgage remains the same.
The table below shows you how you could benefit from reduced monthly payment.
| Without offset | With offset | |
|---|---|---|
| Savings offset against mortgage | £20,000 | |
| Monthly mortgage payment for initial variable rate period | £607.92 | £519.75 |
| Total amount payable | £178,852.15 | £155,087.45 |
| Mortgage interest saved | £23,764.70 | |
| Mortgage term reduced by | 0 years 0 months |
Illustration based on £100,000 repayment mortgage with a variable rate of 5.29% (reverting to 5.00% standard variable rate after 5 years) and £20,000 in an Offset Saver Account ,from month one, over a 25 year period. Also includes a £999 product fee and £25 CHAPS fee. This illustration is based on an example interest rate and is not necessarily the current rate offered by Scottish Widows Bank. The overall cost for comparison is 5.3% APR.
Important information about reduced monthly payment
With reduced monthly payment as your offset benefit, your mortgage payments will be adjusted from your second mortgage payment - your first mortgage payment will always be collected in full. On an ongoing basis, your offset benefit will be calculated for each full calendar month and your mortgage payment will then be adjusted accordingly at the end of the following month. We'll write to you each month to advise you how much your next mortgage payment will be.
Important information about offset
- The more money you have in your savings account the less interest you’ll be charged on your mortgage
- The offset facility is available on all 2 year fixed rates and all variable rates.
- Simpler and easier to manage than offsetting offered by many other mortgage providers – just a mortgage and savings account
- Two offset benefits to choose from – reduced term or reduced monthly payment
- With reduced term as your offset benefit, you could pay off your mortgage sooner and save thousands of pounds in interest payments. Your monthly mortgage payments will stay the same – subject to any interest rate change
- With reduced monthly payment as your offset benefit, your offset savings are used to reduce your monthly mortgage payment whilst the term remains unchanged. In addition, you could also save thousands of pounds in interest payments
- With reduced monthly payment as the offset benefit, your mortgage payments will be adjusted from the second mortgage payment - the first mortgage payment will always be collected in full. On an ongoing basis, the offset benefit will be calculated for each full calendar month and your mortgage payment will then be adjusted accordingly at the end of the following month. We'll write to you each month to advise you how much the next mortgage payment will be.
- As you don't actually earn any interest on your savings account balance there is no tax liability
- You can access your savings any time you need to
- Interest is calculated daily on your mortgage account balance LESS your Offset Saver Account balance then applied monthly to your mortgage account
- No credit interest will be paid on the Offset Saver Account if the balance is more than the outstanding balance on your mortgage. It is your responsibility to monitor this.
- The minimum balance for your Offset Saver Account is £100
- Mortgage Reserve Account is not included in offset arrangements
- You can switch between the two offset benefits – reduced term and reduced monthly payment – up to four times per year
- For at least one month after the mortgage completes, the minimum net balance of your mortgage account, after offsetting any savings, must be £50,000.
- The offset facility is available on variable rate and select fixed rate products. If your mortgage is made up of more than one product, please indicate which product you would like to offset against.
- If you choose part repayment and part interest only to repay your mortgage, you can only offset against one portion.
|
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. |
Summary Box Key Product Information for our Savings Account(s) |
Account Name | Offset Saver Account |
|---|---|
| Interest Rates (AERs) |
No interest is earned |
| Tax Status | N/A |
| Conditions for Bonus Payment | N/A |
| Withdrawal Arrangements | Unlimited withdrawals |
| Access | Internet, telephone or postal banking. |
Try our offset calculator to see how you could benefit.
View the full terms and conditions in the 'A Guide to Offsetting' brochure.
