What is an offset account?
A mortgage offset account is a savings or transaction account linked to your home loan. The balance in your offset account is deducted from your mortgage balance when calculating interest. You still owe the same amount, but you're charged interest on a lower balance.
How it works — A simple example
| Without Offset | With $50,000 Offset |
|---|---|
| Mortgage: $500,000 | Mortgage: $500,000 |
| Interest charged on: $500,000 | Interest charged on: $450,000 |
If your rate is 5.50%, that $50,000 offset saves you $2,750 per year in interest. Over 30 years, the compound effect can save $80,000+ in total interest and shorten your loan by years.
Use our offset calculator to see exactly how much you could save based on your specific numbers.
Offset vs revolving credit
In NZ, many people confuse offset accounts with revolving credit facilities. Here's the difference:
- Offset — a separate account that "offsets" interest on your mortgage. Your savings stay separate from the loan.
- Revolving credit — your mortgage works like a giant overdraft. Your salary goes in, bills come out, and you're only charged interest on the net balance. More flexible but requires strong discipline.
Which NZ banks offer offset accounts?
Not all NZ banks offer true offset accounts. They're more common with some lenders than others. Check our mortgage comparison page to see which lenders offer offset-compatible products.
Who benefits most from an offset?
- High savers — the more you have in the offset, the more you save
- Self-employed — keep your GST or tax savings in the offset until payment date
- Property investors — offset maintains tax deductibility while reducing effective interest
- Anyone with lumpy income — bonuses, commissions, or seasonal income all reduce interest while sitting in the offset
Key considerations
- Offset accounts typically come with floating or variable rates (higher than fixed)
- The interest savings must outweigh the rate premium
- Works best when you maintain a consistently high offset balance
- No interest is earned on the offset account itself — the benefit comes from reduced mortgage interest
Frequently asked questions
How does a mortgage offset account work in New Zealand?
An offset account is a savings account linked to your mortgage. The balance in the offset account is deducted from your mortgage balance for interest calculation purposes. If you have $50,000 in the offset and a $400,000 mortgage, you only pay interest on $350,000—without withdrawing funds or breaking your mortgage.
What is the difference between an offset account and a revolving credit mortgage?
An offset account keeps your money in a separate savings account earning nothing but reducing your mortgage interest. A revolving credit combines a loan and drawdown facility in one account, allowing you to re-borrow paid-off amounts without refinancing. Revolving credit is more flexible but carries higher interest rates. Learn more about revolving credit.
Who benefits most from an offset account?
Offset accounts suit people with variable income (self-employed, contractors), emergency fund holders, or those who want to reduce interest without changing their payment structure. If you have irregular cash flow or expect large lump sums, an offset maximises your savings.
Is the interest saving from an offset account worth the fees?
It depends on your offset balance and rate. If you consistently hold $20,000+ in an offset and your mortgage is $300,000+, the interest saved often outweighs the monthly fee (typically $5–$10). Use our calculator to compare the true cost versus a standard mortgage.
Can I withdraw money from my offset account anytime?
Yes. An offset account is a regular savings account; you can withdraw, deposit, and manage it freely. There's no penalty for accessing your funds, making it ideal for holding an emergency fund while reducing mortgage interest simultaneously.
Find an offset mortgage that works for you
Compare offset account mortgages from all NZ lenders and see how much interest you could save.