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Offset buy to let mortgages – How do they work?

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Aug 15, 2022

Offset buy to let mortgages – How do they work?

It can be very rewarding to be a landlord. However, it can also prove costly. It includes maintenance and upkeep, managing rental periods, and paying taxes.

This is particularly true given recent changes to how landlords are taxed on buy-to-let income. The amount of tax relief landlords can claim on their mortgage under the 2017 amendments has been dramatically reduced.

These tax bills are now much more expensive than they were in the past. There is an option to lessen the impact.

Offset mortgages, a buy-to-let mortgage allows you to use your savings account to lower the mortgage interest on the mortgage deal. This is quite handy. Let’s have a closer look.

The offset buy-to-let mortgages are still relatively new. Our expert mortgage brokers work closely with a few mortgage providers lending in buy-to-let, interest-only mortgages and can help you find the right mortgage deal.

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What is an offset mortgage?

A buy-to-let offset mortgage allows you to offset savings account to lower the pay interest rate you pay on your monthly payments mortgage.

This is an excellent option for landlords since you cannot deduct interest payments from your tax. Your savings must be kept in the same account that the bank or lender provided your mortgage term.

If you have a £200,000 mortgage and £20,000 of savings, you will only pay interest on £180,000.

Is it worth having a mortgage offset account?

There are pros and cons when deciding whether an offset buy-to-let mortgage is right for you.

One of the most significant advantages of a mortgage loan is the ability to reduce interest payments. However, how much you save will depend on your money.

For more information, please speak to one of the mortgage brokers we work with. They can answer your questions and help you find the best mortgage for you.

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What can I do to help my landlord business with an offset buy-to-let mortgage?

You will have to pay taxes on any income you make as a landlord. Before 2017, landlords could deduct the interest they spent on their mortgage from their taxes. They would be taxed only on their profit and not their turnover. This could lead to significant savings, as most landlords have an interest-only mortgage.

Since 2017, however, the amount of mortgage costs that landlords can deduct from their taxes has been decreasing. It will be zero by 2020. It will be zero by 2020. Landlords will be subject to a 20% tax on their entire income. This tax bill could be very costly for landlords.

An offset mortgage can reduce the landlord’s costs. You can reduce interest by putting your savings in an account linked with an offset mortgage balance. This will reduce the impact of tax relief changes.

What is the best way to access my savings?

You can still access your savings money with offset buy-to-let mortgages. These mortgages can be flexible buy-to-let because lenders recognise landlords require cash access.

If I purchase through a limited company, can I get an offset mortgage to buy to let?

Speak with a mortgage broker for mortgage advice specific to this section.

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HMOs can get buy-to-let mortgages to offset their debts

It is not at the moment. However, this may change in the future as the market grows. Speak with a mortgage broker for mortgage advice specific to this section.

Are the interest rates for a buy to let-offset mortgage higher?

They are possible. There aren’t many landlords who can get a BTL offset mortgage. The flexibility they offer usually results in a higher rate. Rates will become more competitive as more lenders enter the field and there is more competition.

What are the alternatives to buy-to-let mortgages?

It may be more profitable to remortgage at the lowest rate possible. However, it could also prove to be more cost-effective depending on the savings you make.

You as a landlord need to consider which ones will bring you the most significant profit and save money.

We provide mortgage advice here to help. They’ll give you the best advice and guide you in the right direction.

Get in touch with an expert BTL mortgage advisor to discuss offset BTL mortgages.

You can contact a mortgage advisor to discuss any topic or request more information, advice is free of charge:

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