Offset Flexible Mortgage
Use your savings to help pay off your mortgage quicker
Royal Bank mortgages are available for over 18s
not keep up repayments on your mortgage
Award Winning Online Join up your mortgage to your savings and current account
Award Winning Online Over 18s only
Award Winning Online You could save thousands in mortgage interest and pay off your balance faster
Award Winning Online Continue to access your savings whenever you need them
Purpose: Purchase or remortgage
A mortgage of £118,507 payable on a variable rate of 4.25% for a mortgage term of 15 years would require 180 monthly payments of £891.50.
The total amount payable would be £161,238.12 made up of the loan amount £118,507 plus interest of £42,731.12. A product fee of £499, a valuation fee of £248 and a CHAPS fee of £30 are also payable.
The overall cost for comparison is 4.4% APRC representative. Balances held in linked accounts will reduce the amount of interest payable.
With an Offset mortgage, you can link your savings and current account balances to your mortgage and only pay interest on the difference between those accounts and your mortgage balance.
For example, if you had a £100,000 mortgage, savings of £9,000 and a current account balance of £1,000 - you would only pay interest on the £90,000.
Your monthly repayments will continue to be based on your full mortgage amount, so this means you’ll be able to pay it off quicker, as your balance reduces faster.
You’ll still have full access to your accounts and can take out money whenever you would like to. Managing your money online, over the phone or in branch will not be affected.
Using your savings wisely
When you use your savings to ‘offset’ your mortgage, you won’t earn interest and the effective rate is equal to the current 4.25% mortgage rate. This is because your savings are used to reduce your mortgage balance instead.
Also, you won’t have to pay any additional tax on your savings income (as you’re not technically earning interest), which might be helpful if you’ve already used your personal savings allowance for the year.
Do I have access and still earn interest on my savings?
Do I have access to my savings?
Yes - you can access them whenever you want.
Do I still earn interest on my savings?
Whilst offsetting, you don't earn any actual interest on the accounts you link to your mortgage. Instead your savings are used to reduce (or "offset") your mortgage balance. What this means is that the effective rate earned on your savings is equal to the mortgage rate - currently 4%.
In addition, because you're not technically earning interest (you're avoiding paying the mortgage interest instead) you don't have to pay any additional tax on your savings income.
What type of current accounts can be connected to an Offset Mortgage?
You can link a Select, Select Silver, Select Platinum Account, Black Account, The Private Bank Account, Advantage Private, Advantage Gold or Graduate account to an Offset Flexible Mortgage. If you have eligible business accounts, these can also be used.
Is there any impact on my monthly mortgage payments?
Your mortgage payments will depend on changes in interest rates. Increasing or decreasing the amount of savings that you offset will not change your payments.
If the interest rate goes down, you can:
- Keep your payment amount the same - which will help to reduce the outstanding balance on your mortgage quicker
- Reduce your payments - to match the new rate. There is a minimum monthly payment amount that you cannot go below
If you already pay more than the minimum repayment amount and the interest rates go up, as long as your payment continues to cover the new interest rate, we will not change your payments.
If you take a payment holiday, underpay or take additional borrowing, your repayments may also change.
Is there a limit on the number of accounts I can link to my Offset Mortgage?
You can include one eligible current account and up to three eligible First Reserve savings accounts. With Business Offset you can include certain business current and savings accounts.
Are additional payments allowed?
Yes. With an Offset Flexible Mortgage you can make additional payments to your mortgage at any time and there's no penalty for repaying all or part of your mortgage early.
What is a payment holiday?
You can apply to take a repayment holiday. With a payment holiday, you don't need to make any mortgage payments for an agreed period up to six months. This can help ease the financial pressure if you need money for another purpose for a short term. Interest continues to accrue during a payment holiday and will be added to the loan. At the end of a payment holiday your monthly repayments are likely to be higher.