Interest is calculated on your outstanding mortgage minus the amount in your Offset Reserve but your monthly payment is always calculated on the total outstanding mortgage. So if you:

Maintain the level of your mortgage payment

If you choose to maintain your current payment level you will effectively be overpaying because the interest payable has reduced. The effect of this further reduces the total interest charged and, as your mortgage balance reduces means:

• for repayment mortgages the possibility of repaying your mortgage early is increased; and
• for interest-only mortgages the capital balance outstanding at the end of the mortgage term is reduced

Reduce your mortgage payment

If you choose to reduce your monthly payments the payments you make will remain the same until the next recalculation of your mortgage. This happens in one of two ways:

• Where a variable rate of interest applies to any part of your mortgage, your monthly payment will be recalculated at a rate change or on an annual review, whichever is earlier.
• Where a fixed rate of interest is applicable to your entire mortgage, recalculation will be carried out at the end of your fixed rate period.

Until your review you are effectively overpaying so, at your mortgage recalculation, we will calculate your new payments on the reduced mortgage balance whilst keeping the mortgage term the same. That means your new payments will be lower than they otherwise would have been.

A one-off fee of £99 applies to add the Offsetting facility to your mortgage.