Mortgage Offset Calculator
This calculator shows exactly how much a linked offset account saves you on a New Zealand home loan, and how much sooner you clear the mortgage. Enter your current loan balance, interest rate and remaining term, then your offset savings balance, your marginal tax rate and PIR rate for comparison purposes, and a term deposit rate to benchmark against. The calculator runs a full monthly amortisation and returns the total interest saved over the life of the loan, the monthly and annual saving, and how many years and months the offset account cuts from your term. It compares your standard mortgage side by side with the offset scenario, showing the effective balance charged interest, the unchanged monthly repayment, total interest and the new loan term. A return comparison table then converts the offset's tax-free effective return into an after-tax figure and stacks it against a term deposit and a PIE fund at your own tax rates, plus a chart tracking your outstanding balance over time and a slider so you can test how a bigger or smaller offset balance changes your annual saving. Use it to decide whether an offset account is worth any extra bank fee or slightly higher rate, and to see how much idle savings in a linked account could be doing for you. Figures are estimates based on your inputs and current rates may differ.
See how much your offset account saves
Enter your loan balance, rate, and offset savings to see the interest saving, term reduction, and comparison with alternatives
How Mortgage Offset Accounts Work in New Zealand
An offset mortgage links a transaction or savings account to your home loan. Instead of paying interest on the full loan balance, the bank calculates daily interest on the net position: your loan balance minus the balance in your linked offset account. If your mortgage balance is $550,000 and you have $50,000 in your offset account, you pay interest on $500,000 each day the $50,000 remains in the offset.
Importantly, your monthly repayments stay the same as for a standard mortgage. The reduction in interest means more of each payment goes toward reducing the principal. This is why offset accounts shorten the loan term rather than reducing monthly payments. The accelerated principal reduction compounds over time, because each month you owe less, which reduces the interest calculation further, which sends even more to principal.
Which NZ Banks Offer Offset Mortgages?
ASB offers offset functionality through its Total Home Loan package, linking transaction and savings accounts against the mortgage balance. ANZ offers offset on its home loan products in some configurations. BNZ has an Offset Home Loan product. Westpac offers offset on eligible home loans. Kiwibank and some other lenders offer revolving credit facilities which function similarly to offset mortgages, with the entire account balance floating against the mortgage. Contact your bank or a mortgage broker to confirm current offset product availability and terms, as product structures change.
The Tax-Free Return Advantage
The most compelling reason to use an offset account rather than a term deposit for your savings is the tax treatment. Interest earned on a term deposit is taxable income, assessed at your marginal rate. Interest savings from an offset account are not income at all. They are simply a reduction in an expense. There is no IRD form to file, no end-of-year tax to pay, and no PIR rate to manage.
For a person on a 33% marginal rate with a 6.75% mortgage, the offset account delivers an effective 6.75% tax-free return. To match this with a term deposit, the deposit would need to pay 6.75% divided by (1 minus 0.33), which equals approximately 10.07% gross. No term deposit in the New Zealand market pays that. For someone on 39%, the equivalent gross return needed is even higher: 6.75% divided by 0.61 equals approximately 11.07%.
Frequently Asked Questions
Does keeping more in my offset account reduce my repayments?
No, not immediately. Your scheduled repayments stay the same. The benefit manifests as a shorter loan term, because more of each fixed payment goes to principal. Some banks allow you to apply for a repayment reduction once you have built significant offset savings, but the default arrangement is a term reduction rather than repayment reduction.
What happens if I withdraw from my offset account?
Your offset savings can be withdrawn at any time. They are not locked in. When you withdraw, the effective interest-bearing balance increases and your interest for that day rises accordingly. Most people use their offset account as their main transaction account, with salary going in and bills going out, maximising the days their money reduces the mortgage.
Is a revolving credit facility the same as an offset mortgage?
They are similar but structured differently. A revolving credit facility combines your loan and savings in one account. You can draw up to a limit and repay freely. An offset mortgage keeps the loan and savings in separate accounts but links them for interest calculation purposes. Both achieve a similar outcome of reducing effective interest. Revolving credit requires more financial discipline because it is easy to spend the equity you have built up.
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