Updated: December 17, 2021

Buy-to-Let Offset Mortgages

Trying to save money with a buy-to-let offset mortgage? Our guide will tell you if a BTL offset mortgage is suitable for you and the best rates to look for.

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No impact on your credit score

Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: December 17, 2021

Offset buy-to-let (BTL) mortgages can help make significant savings on your mortgage interest, but there are both pros and cons involved in getting one.

By following this guide, you’ll have a clearer understanding of what an offset mortgage is, how to get one, and which alternative options are available for you to consider.

What is a buy-to-let offset mortgage?

A buy-to-let (BTL) offset mortgage provides a way of using your savings to reduce the amount of interest on your repayments each month, without losing access to it.

So, for example, if your mortgage is for £300,000 and you have £30,000 in savings, with an offset BTL mortgage you’ll only pay interest on £270,000.

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How do they work?

With an offset mortgage, the provider opens a savings account which is used to hold your cash – but formally, this sum is attached to the mortgage contract.

When you put money in the savings account it’s automatically deducted from your mortgage loan. Depending on the type of offset contract you choose, this can either reduce your interest repayments or your mortgage term.

You can access your savings at any time, if needed. If you do, your mortgage interest (or reduced term) is simply re-calculated. So, in the above example, if you needed access to £10,000 you could get it but you’d then pay interest on £280,000 rather than £270,000.

You won’t be able to earn interest on the savings used to offset the mortgage, so before you go ahead, it’s best to speak to a mortgage expert who can ensure you’ve got the right product and rates for your situation.

How can they help landlords?

There are several ways you can benefit from an offset BTL as some providers offer two options:

Payment reduction –
Reduction on mortgage term –

Your monthly repayments will be lower, helping you budget better each month with higher disposable income

You’ll make the same monthly payments as you would on a regular mortgage, but the mortgage will be paid off quicker by ‘offsetting’ against the term

Payment reduction offsets are generally available on repayment and interest-only mortgages, while term reduction offsets are often applied to repayment mortgages.

The main advantages of an offset buy-to-let mortgage are as follows…

  • If you have a big enough savings pot to make a significant reduction in your mortgage, you could save a lot on interest repayments or shorten the mortgage term.
  • You can use funds in your ISA, current accounts and savings, so you can put funds to use to reduce your interest that may otherwise sit idle.
  • Your savings remain accessible for an emergency, life event, or other investments should you need to take them back out.
  • They can be tax efficient, especially for higher-rate taxpayers

How to get an offset buy-to-let mortgage

Step 1.
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Prepare your documents

You’ll need to have certain documents on-hand to be prepared for your application; these include proof of address and income as well as evidence of your potential rental income for the buy-to-let property. It’s best to get a quote for the rent from 2-3 fully accredited letting agencies.

Use our mortgage application guide to find out everything you’ll need.

Calculate savings and check credit

Decide how much of your savings (if not all) you would like to add to your mortgage for the interest offset. Remember you can access these savings if you need to, although that will change the amount of mortgage that’s offset.

Calculate your total income and ensure that your credit score is up to date and good enough to get the mortgage you need, by downloading your credit reports.

Speak to an expert offset BTL advisor

An offset BTL mortgage is a niche product – it’s only offered by a select handful of providers. To find the best offer, you’ll need to solicit help from a specialist mortgage broker who has years of experience in helping people gain access to this type of borrowing.

Our unique broker matching service is specifically designed to match you with a broker who is best served to help with these situations. Make an enquiry and we will arrange for someone to get in touch straight away.

What are the eligibility requirements?

The criteria for a buy-to-let offset mortgage can be stricter than what they’d be for a standard BTL as it’s considered more of a specialist product not generally available from a wide range of lenders.

Some providers require a minimum 75% loan to value ratio (LTV), so you’d need a deposit of at least 25% to be considered. Most buy-to-let mortgages also require the rental income to total a minimum of 125% of the mortgage repayments.

As with all mortgages, lenders will look at your credit score, income and outgoings to determine affordability. Your age will also play a role as many lenders don’t allow applicants under 25 or over 75. However, if you don’t fit any of these requirements, a broker may still be able to help you find a lender with more relaxed terms.

Compare offset BTL lenders and rates

To give you an idea of the rates you may get, we’ve listed some of the lenders that offer offset BTL mortgages:

Lender Introductory Rate Variable Rate Lender Fees
Barclays 1.52 percent 3.59 percent £1,784
Coventry 1.79 percent 4.49 percent £1,007
Scottish Widows 1.84 percent 3.59 percent £1,009
Clydesdale Bank 2.04 percent 4.55 percent £1,351

However, some of the best offers may come from more specialist providers. So to find the best rates and terms, you’ll need to compare all offers on the market and work through a specialist. A mortgage broker will work hard on your behalf and save you time, money and hassle by finding an appropriate rate for any situation – even if your requirements fall outside of the norm.

Are there any drawbacks to consider?

There are possible disadvantages to think about if you’re considering an offset buy-to-let mortgage, but it’s a good idea to talk them over with a mortgage advisor if you’re concerned, as they will be able to help you fully assess the risks involved.

Potential drawbacks include…

  • Some interest rates for offset BTL mortgages are higher than standard BTL mortgages, so you’ll need to compare offers carefully to see if it’s worth it.
  • If you are able to put more cash savings towards the deposit, this may get you a better rate offer.
  • If you need to withdraw from your offset savings account, monthly repayments and/or interest rates will increase.
  • You won’t earn interest on the savings held in the offset account by the lender.

What alternative options should you consider?

The new tax rules on mortgage interest relief only apply for private landlords, not businesses – so in some cases, it may be worth establishing a limited company before purchasing a new buy to let property.

However, private companies often pay more interest than private owners and filing taxes for a private company is more complicated and you may need help from a qualified accountant.

It’s also important to weigh up how much money you could make if you invest your savings in shares or other investment opportunities instead of placing it with a mortgage provider.

Speak to a broker who specialises in offset BTL mortgages

An offset mortgage can be a great way for your savings to reduce your mortgage interest repayments. But they may not be suitable for everyone.

To ensure it’s the best option and find out what rates are available, contact us today. We work with specialist brokers who will provide unbiased advice on whether an offset mortgage is the right choice for you.

We don’t charge a fee and there’s no obligation to take things further after an initial consultation. Contact us on 0808 189 0463 or make an enquiry and we’ll connect you to the broker that’s right for you.


Can I offset 100% of my buy-to-let mortgage?

It’s theoretically possible if the amount you have left on your mortgage is exactly the same as the amount you have in savings. Although you might think this would mean paying no interest on your mortgage and earning none on your savings, it’s not that simple in reality.

This is because of the difference between credit interest and debt interest. Credit interest uses the actual number of days in the calendar month, while debit interest divides the year into 12, so there would be at least some discrepancy.

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Pete Mugleston

Pete Mugleston

Mortgage Expert

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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