Free Mortgage Offset Calculator for New Zealanders
An offset account links savings to your home loan, reducing the interest charged based on the savings balance. The calculator shows the interest saving and the effective rate of return on the offset balance.
Your loan and offset
Based on a $650,000 loan at 6.50% over 30 years with an average $25,000 offset balance.
About our Mortgage Offset Calculator
$40,000 sitting in a BNZ TotalMoney offset against a $580,000 mortgage at 6% saves $2,400 a year of interest, every year, while the cash remains available to spend. Over 25 years that compounds to about $60,000 of total interest saved and roughly 2 years off the loan term.
How to use it
Enter your mortgage balance, contract rate, years remaining, and the offset balance you intend to maintain. The calculator returns the annual interest saving, the time saved over the loan, and the effective rate of return on the offset balance.
Why use it
For comparing offset against a term deposit, savings account, or lump-sum repayment. The offset effect is equivalent to earning the mortgage rate, tax-free, on the savings balance, which usually beats the after-RWT return on cash held outside an offset.
The maths behind it
Effective interest = Mortgage rate × (Loan balance − Offset balance) An offset account links savings to a home loan. The savings balance is subtracted from the loan balance for the purpose of calculating interest, so the bank charges interest only on the net (loan minus offset). The savings stay in your name and can be withdrawn at any time, unlike a lump-sum repayment which is permanent. Most NZ offset products charge no interest on the offset balance, just the interest saving on the mortgage side.
Worked example
Imran, software engineer in Hawera, with $580,000 mortgage and $40,000 in a BNZ TotalMoney offset account.
Imran’s mortgage rate is 6%. With a $40,000 offset balance, the bank charges 6% interest on $580,000 − $40,000 = $540,000, not on the full $580,000.
Annual interest saving: $40,000 × 6% = $2,400. Compounded over a 25-year remaining loan, the time saving is roughly 2 years off the term and about $60,000 of total interest avoided.
Imran can spend the $40,000 anytime; it is his own savings. The offset just reduces the mortgage interest charge daily based on the offset balance. If the balance drops to $20,000, the interest saving halves to $1,200/year.
Things to keep in mind
- Not all banks offer offset. BNZ TotalMoney and Kiwibank Revolving Credit are the most common NZ offset products. ANZ, ASB, and Westpac offer redraw or revolving-credit alternatives that work similarly. Check whether your bank has an offset product before assuming it is available.
- No interest earned on the offset. Money in the offset account does not earn interest in the savings sense. The "return" is the avoided mortgage interest, which at a 6% mortgage rate is equivalent to a 6% pre-tax-equivalent return for an owner-occupier (no RWT, since it’s not interest income).
- Comparison with term deposit. A 6% offset is equivalent to a roughly 8.5% pre-tax term deposit (after RWT at 30%). Few term deposits in NZ pay anywhere close to that, which makes offset a competitive home for emergency-fund savings.
- Offset has the same effect as a lump-sum. An offset balance produces the same interest saving as a lump-sum repaymentLump sum (mortgage)One-off extra payment toward principal that reduces total interest and shortens the loan.View in glossary → of the same amount. The difference is reversibility: offset balance can be withdrawn anytime, lump-sum is permanent.
NZ-specific notes
FAQs
Why is offset better than a savings account?
For someone with a mortgage, the offset effect is equivalent to earning the mortgage rate on the savings, tax-free. A 6% mortgage offset typically beats a 5% term deposit (which would be taxed at RWT). The catch: offset only works against your own mortgage; if you have no mortgage, the comparison is just savings vs term deposit.
Can I link other accounts to my offset?
Yes, on most NZ offset products. BNZ TotalMoney lets you link up to 8 accounts; Kiwibank similar. The combined balance offsets the mortgage daily, so the effective offset can be larger than just one savings pot.
How is offset different from a lump-sum repayment?
Lump-sum is permanent (cash gone). Offset is reversible (cash available). Both produce the same interest saving on the same balance, so offset is generally preferable for any savings you might want to access; lump-sum makes sense once you no longer need the cash.
Does the offset account work on a fixed-rate loan?
Most NZ offset products are floating-rate. Some banks offer offset on fixed-rate loans with a small rate premium. Check the specific product details.
References & sources
- BNZ, "TotalMoney". bnz.co.nz
- Kiwibank, "Home loans". kiwibank.co.nz
- Inland Revenue, "Resident Withholding Tax (RWT)". ird.govt.nz
- Reserve Bank of New Zealand, "Mortgage interest rates". rbnz.govt.nz