What do you want to know about our Flexible Mortgage?
How offset works
The way the offset facility on our Flexible Mortgage works is very simple – much simpler than that offered by most other mortgage providers. A savings account (Mortgage Deposit Account) is set up alongside your mortgage.
The money in your savings account is 'offset' against your mortgage. Rather than earning interest on your savings, you won’t be charged any interest on the equivalent amount of your mortgage.
This could potentially save you thousands of pounds in interest payments and allow you to pay off your mortgage earlier.
Diagram and savings illustration
The way offsetting works is quite simple – as shown by the diagram below
You are paying less interest but your monthly payments stay the same – subject to changes in interest rates. More of your monthly payment is used to repay the balance of your mortgage – which could make it possible for you to pay off your mortgage sooner.
How soon is up to you and how much money you have in your savings account. The table below gives a specific example of what offsetting could help you achieve.
| Without offset | With offset | |
|---|---|---|
| Savings offset against mortgage | £15,000 | |
| Monthly mortgage payment | £817.84 | £817.84 |
| Total amount payable | £245,476.60 | £206,774.29 |
| Mortgage Interest saved | £38,702.31 | |
| Mortgage term reduced by | 3 years 11 months |
Illustration based on £130,000 repayment mortgage with a standard variable rate of 5.75% and £15,000 in a Mortgage Deposit Account over a 25 year period. 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.
Features and Benefits
- The more money you have in your savings account the less interest you’ll be charged on your mortgage
- You could pay off your mortgage sooner and save thousands of pounds in interest payments
- The offset facility is available on the variable, discounted, tracker and some fixed rate products
- Simpler and easier to manage than offsetting offered by many other mortgage providers – just a mortgage and savings account
- 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 is not included in offset arrangements
- Interest is calculated daily on your mortgage account balance LESS your Mortgage Deposit Account balance then applied monthly to your mortgage account
- Your monthly mortgage payments stay the same – subject to any interest rate change
- No credit interest will be paid on the Mortgage Deposit Account if the balance is more than the outstanding balance on your mortgage
- The minimum balance for your Mortgage Deposit Account is £100
