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Mortgage Reserves - How an Offset Works

Heard of an offset mortgage, but are you unsure how it works and whether you can use reserves to reduce your monthly mortgage charges? Read on to learn how lenders work and when an offset mortgage may be advantageous.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin2023-05-09
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What Are Mortgage Reserves?

Buying a property in the UK is increasingly challenging - and with a growing number of banks and lenders to choose from, new buyers can find the mortgage sector daunting.

Revolution Brokers is here to help, with this guide about mortgage reserves one from our extensive library to help you get to grips with all the borrowing options out there.

For more information about offset mortgages, or independent advice about the best type of mortgage for your borrowing needs, give business loan broker a call on 0330 304 3040, or email the team at [email protected].

What are Mortgage Reserves?

Reserves are a 'back-up' part of a mortgage loan agreement that isn't loaned immediately but is put into a separate account as a reserve to access later if required.

Mortgage reserves are most common in current account mortgages and offset mortgages, and can constitute a hybrid lending negotiation that combines both elements.

This reserve balance acts as an overdraft, which means it can be drawn from without the need for an extension application or remortgage.

Reserves are interest-only, and there is usually the option to make payments to bring down the amount of borrowing in the mortgage reserve.

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Based on your yearly income,
you may be able to borrow


Most lenders will let you borrow 4.5 times your annual salary so, as long as you have a standard 10% deposit, you should be able to borrow this much.


Depending on your personal circumstances, some lenders may let you borrow 5 times your salary.


Lenders usually cap the amount they lend at 5.5 times your salary, so it’s unlikely you’ll be able to borrow more than this.

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Why is it Useful to Have a Mortgage Reserve Account?

Mortgage reserves exist as a contingency; should you need additional funds. There isn't any interest payable on the unused reserve balance unless it is drawn down.

For example, if you apply and are approved for a £100,000 home loan, but only need £60,000 to start with, the £40,000 balance could be placed in a reserve account. You pay interest on the £60,000 you have borrowed, but nothing on the £40,000.

In a year if you have accumulated savings, you can pay back some or all of the £40,000.

How Can I Get a Reserve Mortgage in the UK?

Mortgage reserves are not particularly common and can be challenging to find when applying to a lender you do not already bank with.

In many cases, mortgage reserves are only available from specialist lenders - contact Revolution Finance Brokers if you would like to negotiate such a product. We can liaise with specific lenders who can support your application.

Barclays Mortgage Reserve was previously a popular product but is now not offered to new applicants. Nationwide also stopped offering mortgage reserve accounts.

However, there remain niche lenders with competitive terms offering this alternative mortgage overdraft option.

What Criteria are Important in Applying for a Mortgage Reserve Account?

The rates and borrowing limit offered will depend on several criteria:

  • How much you earn and how stable your income is.
  • Your credit rating and credit history.
  • How much of a deposit you have available - most lenders will require at least a 15% deposit although some can accept 10% or even 5%.
  • Your age and the risk factor associated.

Some lenders also dictate that you need to own equity in your property above a particular threshold.

Do Reserve Mortgage Calculators Work?

Reserve mortgage calculators are an excellent way to get a rough idea about what you can borrow but unfortunately cannot provide guidance about whether you would meet eligibility or affordability requirements.

The best option is to contact an independent broker who can provide current market rates and advice whether you would be eligible to apply.

Expert Brokers for Mortgage Reserve Lending

With any niche or unusual mortgage product, a whole-of-market broker is essential to identify the best lending options and recommend lenders who will accept your application.

If a mortgage reserve is an attractive option, give us a call on 0330 304 3040, or email [email protected] and our consultants will be happy to help.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

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FCA disclaimer

The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.

We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.

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