Offset vs revolving credit calculator
What is the difference between an offset mortgage and revolving credit in NZ?
Both use your savings to cut mortgage interest. An offset account keeps savings separate and offsets them against the loan balance, earning no interest itself. Revolving credit merges the two into one account, so every dollar sitting there reduces the balance directly. The saving is similar; the difference is discipline and flexibility.
In an offset arrangement this money stays yours and stays accessible — it simply stops earning interest while it offsets the loan.
The alternative: what that money would earn sitting in savings.
Interest earned is taxed; mortgage interest saved is not. This is why offsetting usually beats saving even at similar rates.
Interest saved over the term
$187,848
- Mortgage interest without offset
- $512,811
- With savings offsetting
- $324,963
- First-year interest avoided
- $3,900
- Same savings earning interest
- $1,608
- Offset advantage, year one
- $2,292
This is a general estimate, not financial advice.
Rates change weekly. interest.co.nz publishes what every New Zealand bank is advertising today, and Sorted is the government’s own calculator if you would like to check these numbers against a second source.
Common questions
- Which saves more, offset or revolving credit?
- For the same balance sitting in the account, the interest saved is effectively the same. The difference is behavioural and structural: an offset keeps savings in a separate visible account, while revolving credit merges the loan and your everyday banking, which is more flexible but easier to spend down.
- Why does offsetting beat earning interest on savings?
- Because interest you earn is taxed and interest you avoid is not. At a 33 percent resident withholding tax rate, a 4 percent savings account nets about 2.7 percent, while offsetting against a 6.5 percent mortgage saves the full 6.5 percent. Enter your own rates above to see the gap.
- Do all New Zealand banks offer offset accounts?
- No. Offset facilities and revolving credit are offered by some but not all New Zealand lenders, and the details differ — how many accounts can be linked, whether the loan must be floating, and whether a monthly facility fee applies. Check what your lender actually offers.
- Is my offset money still available?
- Yes. Money in an offset account remains yours and accessible; it simply earns no interest while it is offsetting the loan. Withdrawing it increases the interest charged on the mortgage from that point. Revolving credit works the same way, within your approved limit.