Equity Release - Flexible Lifetime Mortgage

The way the offset facility on our Flexible Lifetime Mortgage works is really very simple.

An offset savings account is set up alongside your mortgage. 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.

This reduces your monthly interest payment. The more money you offset, the lower your monthly payment will be.

Diagram and savings illustration

The way offsetting works is quite simple — as shown by the diagram below

	Without offset	With offset
Mortgage amount	£50,000	£50,000
Savings offset against mortgage	£0	£10,000
Monthly interest payment	£210.93	£169.27
Monthly payment reduced by	£0	£41.66

Illustration based on £50,000 interest only mortgage with a variable rate of 5.00% and £10,000 in an offset savings account. This illustration is based on an example interest rate and is not necessarily the current rate offered by Scottish Widows Bank.

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.

Features and Benefits

• The more money you have in your savings account the lower your monthly 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
• Mortgage Reserve Account balance is not included in offset arrangements
• Interest is calculated daily on your mortgage account balance LESS your offset savings account balance then applied monthly to your mortgage account
• Your monthly mortgage payments may change depending on your savings balance
• No credit interest will be paid on the offset savings account if the balance exceeds the mortgage account balance
• The minimum balance for your of the offset savings account is £100
• For at least one month after the mortgage completes, the minimum net balance of your mortgage account after offsetting any savings, must be £10,000