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Scottish Widows Offset Mortgage Formula:
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Scottish Widows Offset Mortgage is a financial product that links your mortgage to your savings account. The savings balance is offset against your mortgage debt, reducing the interest you pay while maintaining access to your savings.
The calculator uses the Scottish Widows offset mortgage formula:
Where:
Explanation: The formula calculates the interest payable by subtracting your savings from your mortgage balance and applying the interest rate to the net amount.
Details: Offset mortgages can significantly reduce interest payments, shorten mortgage terms, and provide flexibility while keeping savings accessible. They are particularly beneficial for higher-rate taxpayers.
Tips: Enter your total mortgage loan amount, savings balance, and annual interest rate. All values must be non-negative numbers. The calculator will show your interest payable amount.
Q1: How does offset mortgage differ from regular mortgage?
A: In offset mortgages, your savings balance reduces the mortgage amount used for interest calculation, potentially saving thousands in interest payments.
Q2: Can I access my savings with offset mortgage?
A: Yes, one of the main advantages is that your savings remain accessible while still reducing your mortgage interest.
Q3: Are offset mortgages suitable for everyone?
A: They work best for people with significant savings who want to reduce mortgage interest while maintaining liquidity.
Q4: What are the tax implications?
A: Since you're not earning interest on savings, you don't pay tax on that interest, making offset mortgages particularly attractive for higher-rate taxpayers.
Q5: Can I make overpayments with offset mortgage?
A: Most offset mortgages allow overpayments without penalties, helping you pay off your mortgage faster.