Feature article
What is an offset mortgage & is it for you?
Everything you need to know about this handy mortgage feature.
26 November 2025
Paying off a home loan is a long-term game, so it’s no surprise many Kiwi look for ways to save on interest and get debt-free faster. One clever (and often overlooked) option is an offset mortgage.
But what exactly is it? How does it differ from a revolving credit loan? And is it the right move for your current situation? Here’s the simple answer.
What is an offset mortgage?
An offset mortgage links your everyday bank accounts and savings to your home loan. Instead of earning a tiny bit of interest in a savings account, the money in these accounts helps reduce the amount of your mortgage that gets charged interest. Your linked savings remain fully accessible and you can spend or top them up at any time.
In simple terms: the more cash you’ve got in linked accounts, the less interest you pay.
A couple of important things to note when considering an offset loan:
- Most offset home loans in New Zealand must be on a floating (variable) rate, which means your repayments can go up or down as interest rates move. Variable rates are typically higher than fixed-term rates.
If the balance in your linked accounts drops, the amount of your loan being offset also drops, so you’ll pay more interest until the balance rises again.
Example: Kev’s offset loan
Kev has a $500,000 home loan and $40,000 across his savings and everyday accounts:
- If he links those accounts to his mortgage, he’ll only be charged interest on $460,000 ($500,000 minus $40,000).
- His savings stay sitting in his account and help lower the interest charged each day.
Over time, this can mean he saves tens of thousands of dollars and potentially pay off his home loan years sooner.
Is an offset mortgage a good idea?
The benefits of an offset mortgage
Save on interest: Because you’re only paying interest on the reduced balance, your savings work harder for you.
Keep access to your cash: Your accounts stay separate, and you can withdraw your money whenever you need it.
Pay off your home faster: Less interest means more of your repayments go toward reducing your loan principal.
Flexibility: Useful for people with healthy savings habits, strong emergency funds, or lumpy income (e.g. contractors, investors).
For Kev, his $40,000 offset balance saved him around $2500 in interest in the first year alone (assuming 6% floating rate). If he maintains $40,000 savings in his account over the full 25-year term he would save around $110,000 in interest and shave over three years off his loan period.
What is the downside of an offset account?
Higher rates than fixed loans: Offset loans are usually floating, so the rate is slightly higher than a fixed-term mortgage.
Rates can fluctuate: If the market changes, your repayments may rise.
Not ideal if you’ve got minimal savings: The less you have to offset, the smaller the benefit.
Limited availability: Not all New Zealand banks offer offset mortgages, and policies differ.
Which banks offer offset mortgages in NZ?
As of 2025, offset mortgages are available from:
- ANZ – ANZ One (Offset)
- BNZ – TotalMoney
- Kiwibank – Offset Home Loan
- Westpac – Choices Offset Floating
Offset mortgage vs revolving credit: what’s the difference?
Offset and revolving credit loans both help you reduce interest, but they operate differently.
| Offset mortgage | Revolving credit | ||||
|---|---|---|---|---|---|
| Account structure | Account structure | Loan is separate from linked everyday/savings accounts. | Loan is separate from linked everyday/savings accounts. | One big account that functions as your loan and everyday spending account (like a large overdraft). | One big account that functions as your loan and everyday spending account (like a large overdraft). |
| Savings access | Savings access | Easy access to linked savings; your withdrawals immediately increase the interest charged. | Easy access to linked savings; your withdrawals immediately increase the interest charged. | Your everyday balance reduces the interest. You can redraw funds up to your limit. | Your everyday balance reduces the interest. You can redraw funds up to your limit. |
| Discipline required | Discipline required | Moderate discipline. You still have structured principal repayments. | Moderate discipline. You still have structured principal repayments. | High discipline. Easy to overspend or not pay down the principal if not careful. | High discipline. Easy to overspend or not pay down the principal if not careful. |
| Best for | Best for | People with solid, consistent savings/emergency funds, or investors. | People with solid, consistent savings/emergency funds, or investors. | High-income earners with irregular cash flow who are highly disciplined. Often used to fund renovations. | High-income earners with irregular cash flow who are highly disciplined. Often used to fund renovations. |
Offset mortgage FAQs
Can I use an offset mortgage alongside a fixed-rate mortgage?
Yes, most people in New Zealand split their loan, fixing the majority for stability and putting a smaller portion on an offset for flexibility.
Do I lose access to my money?
Not at all. Your savings remain yours to use whenever you need them.
Will the bank charge me a fee to break my loan if I use an offset?
Because offset loans are typically floating, there are usually no early repayment charges, unlike with fixed-rate loans.
Talk to a mortgage professional
Every household’s situation is different, and even small changes in interest rates or savings habits can have a big impact. Before making a decision, talk to a mortgage adviser or lending specialist. They can compare options across banks, run personalised calculations, and help you work out whether an offset mortgage is right for you.
Disclaimer:
This guide is for general information only and isn’t personalised financial advice. Offset mortgages work differently across banks and the exact impact on your loan will depend on your interest rate, account balances, spending habits, and overall financial situation. We’ve done our best to ensure the information is accurate at the time of publishing, but policies, rates, and product details can change. Before making any decisions, speak with a qualified mortgage adviser or lending specialist who can assess your individual circumstances.
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