Navigating the world of mortgages can feel like a complex maze, especially as interest rates begin to ease after a few turbulent years. More Kiwis are looking for smarter ways to manage their home loans without having to change the way they live or spend. Two increasingly popular tools that help reduce the amount of interest you pay and potentially shorten the life of your loan are offset accounts and revolving credit facilities. Understanding how these options work is key to managing your debt more effectively and making your money work harder for you.
We spoke to Sarah Kirkwood, Head of Advice here at Properli to get her opinion on the benefits of an offset account. “I often recommend offset accounts to clients who like to keep access to savings and who keep their accounts in good credit balances” Sarah explains.
Let’s dive into how you an reduce the interest on your home loan, with an offset account.
What Is an Offset Account?
A true ‘Offset’ account allows you to keep your cash split across multiple accounts and this is linked to one mortgage ‘offset’ facility. The total balances across your multiple accounts will be offset against the balance in the one mortgage facility.
“This is ideal for couples who like to have their own accounts or have multiple joint and savings accounts”, Sarah explains. It keeps your cash/savings/income separate from your mortgage and can be easier to manage as it mimics the traditional use of cheque and saving account set up.
Benefits include:
- You can keep savings separate (e.g., joint, personal, or emergency funds)
- Have visibility and control over their money
- Still reduce interest without locking away funds
How to reduce the interest on your home loan, with an offset account:
Let’s say you have a mortgage of $500,000 with a floating interest rate of 6.69% p.a. (typical as of 2025), and you keep $20,000 across various accounts (savings, joint account, personal account).
Without an Offset:
- Interest is calculated on the full $500,000
- Annual interest: $500,000 × 6.69% = $33,450
With an Offset:
- $20,000 in linked accounts offsets the loan
- Interest is charged only on $480,000 ($500k – $20k)
- Annual interest: $480,000 × 6,69% = $32,112
Annual Savings: $1,338 per annum.
And that’s without doing anything extra, just leaving your money where it already is! Over the life of the loan, those interest savings compound and can help you shave years off your mortgage.
“It’s one of the simplest ways to reduce interest and shorten the life of your loan without changing your lifestyle and your current account set up. Instead of leaving money sitting in a low-interest savings account, why not use it to cut your mortgage interest and get ahead faster?!” says Sarah, qualified Financial Adviser.
How is it difference to a Revolving Credit Facility?
A revolving credit facility is like a giant overdraft facility that allows you to use your cash to offset your loan. A revolving credit is one mortgage account that you can put your cash and/or income into and you only pay interest on the difference between your cash in the account and the limit.
This suits people who can:
- Can budget tightly
- Want flexibility and easy access to cash
- Are disciplined enough not to redraw the balance impulsively
Let’s say you have a $500,000 mortgage with a $50,000 revolving credit facility. If you deposit $20,000 into the account, you’re only charged interest on $480,000.
Annual interest = $480,000 × 6.69% = $32,112
As you withdraw funds, the interest-bearing portion of your mortgage increases again, up to your approved limit.
Offset accounts are offered by some major banks such as BNZ, Westpac, and Kiwibank, but not all banks offer them, making it essential to consult a mortgage adviser who understands how each works.
Offset Account or Revovling Credit, what’s the best?
Feature | Offset Account | Revolving Credit |
Separate savings? | Yes | No |
Discipline required? | Low | High |
Ease of use? | High (mimics regular banking) | Moderate |
Access to cash? | Full access | Full access |
Available at all banks? | No | Yes |
The key is understanding your financial habits. If you like keeping things separate and tidy, offset might be your best friend. If you like flexibility and are good at sticking to a budget, revolving credit can work wonders.
Whether you use a true offset account or a revolving credit facility, the outcome is the same your cash is reducing the interest you pay on your home loan.
The key is understanding which type of offset is best for you and how you like to manage your accounts. All banks offer a version of a revolving credit, but not all offer offset accounts, so it’s important to speak to a trusted advisor around how each type of accounts works and which will work best for you and your needs.
If you want to reduce the interest on your home loan, speak to one of our Financial Advisers today about how an offset account might work for you.
