Offset mortgage NZ: how it works and which banks offer one
An offset mortgage links your everyday and savings accounts to your home loan, and the balance in them is subtracted from the amount you pay interest on. Keep $30,000 in linked accounts against a $200,000 floating loan and you’re charged interest on $170,000. In NZ, Kiwibank, Westpac and BNZ offer one, and you don’t pay tax on the interest you save.
The example is illustrative: $200,000 floating portion at 6.30% p.a. and $30,000 in linked accounts. Offset rates and account rules change, so check the current terms with the bank.
Clients often ask me whether they should keep their savings separate or put them against the mortgage. An offset mortgage is the neatest answer if your bank has one, because you keep your money and still cut your interest.
How an offset mortgage works, with numbers
Say you’ve got $200,000 on a floating rate of about 6.3%, and $30,000 sitting in linked accounts.
| Without offset | With offset | |
|---|---|---|
| Balance you pay interest on | $200,000 | $170,000 |
| Interest a year at 6.3% | $12,600 | $10,710 |
| Interest saved | $1,890 a year |
That’s about $157 a month. Your $30,000 is still there. You can spend it tomorrow if you need to, and your interest goes back up.
The tax point matters. Interest in a savings account is income, so you pay tax on it. With an offset, you simply aren’t charged the interest, so there’s nothing to tax. To keep the same $1,890 after tax from a savings account, you’d have to earn more than $1,890 before tax.
One limit: offset works against a floating portion only. If your savings are bigger than that portion, the extra does nothing. Size the floating part to what you’ll really keep in the accounts. If you’re not sure how to split a loan, fixed or floating explains it.
Which banks offer an offset mortgage in NZ
From what I can verify, only three banks have a true offset. ANZ and ASB use revolving credit, which is similar in effect but works differently. Here’s how the three compare:
| Bank | Product | Linked accounts | Notes |
|---|---|---|---|
| Kiwibank | Offset Home Loan | Up to 8 | 1:1 offset. Individuals only (max 2 borrowers), not trusts or companies. New links only to Free Up and Now accounts. |
| Westpac | Choices Floating with Offset | Up to 10 | Floating rate. Linked accounts earn no interest. |
| BNZ | TotalMoney | Up to 50 in a group | Floating rate. Includes family members’ accounts. |
All three run at floating rates, currently around 6.25–6.4% for standard floating. Offset rates may differ slightly, so ask the bank for today’s figure before you plan around it.
Not sure whether an offset mortgage would actually save you money? I’ll run your numbers and tell you straight.
Book a free offset check →Family offset
All three let family accounts count, within limits. Kiwibank accepts a spouse or partner, child, parent or joint borrower. Westpac includes partner, parents and children. BNZ’s TotalMoney group can include family members’ accounts. A parent’s savings can cut a child’s interest while staying in the parent’s name and available to them. Talk to the family about it first, because their balance affects your loan every day.
Offset mortgage vs revolving credit
With revolving credit, your pay goes into the loan itself and you draw back out as needed. With an offset, your money stays in separate accounts and the loan is untouched. The interest effect is similar. Offset keeps your spending money and your debt apart, which suits people who don’t trust themselves with a big credit limit. I’ve compared both in what is a revolving credit mortgage.
Who an offset mortgage suits
- Savers with a steady buffer, an emergency fund or a deposit for the next property
- Business owners holding tax money aside for a few months
- Families with parents or adult children who want to help
- Anyone who wants to pay the loan down faster without locking money away. See how to pay off your mortgage faster for the other levers
It suits you less if you spend what’s in the account, or your savings are small. A few thousand dollars saves little, and floating rates are higher than fixed. For help with your whole structure, see getting the best from your home loan.
Common questions
Which NZ banks offer an offset mortgage?
Do you pay tax on offset savings?
Does an offset work on a fixed rate?
Can family link their accounts to my offset?
Read next
Revolving credit vs offset
How each one cuts your interest, and which suits you.
Pay off your mortgage faster
Six ways that actually work.
Fixed or floating
When each one makes sense, and how to split.
Talk it through with Yatin. Free, no obligation, and usually one phone call.
Book a free chat →Or call 022 064 7770
This article is general information only and isn’t personalised financial advice. Figures are illustrative and based on the assumptions shown. Mortgage Sense is a trading name of Yatin Kainth, a Financial Adviser (FSP1007497) providing advice under the Mortgage Managers licence (North West Group Holdings Ltd, FSP682791). See the Disclosure Statement.
Ready to talk it through?
Get mortgage advice NZ homeowners actually trust. Book a free, no-pressure chat with Yatin.
Book a free chat →