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New Zealand·Calculators·Offset mortgage

Offset mortgage calculator

How much interest and time an offset balance saves on your home loan, when repayments stay the same.

Your numbers
$NZD
% p.a.
years
$NZD
$NZD / month
Interest saved:
$142,161
Payoff 21 years 4 months from now
Interest without offset$466,452
Interest with offset$324,291
Interest saved$142,161
Months saved44
Payoff date21y 4m from now
The interest rate is fixed for the full loan term. The offset balance earns no interest of its own. No tax is paid on the interest saved (the benefit is the interest not charged, not interest received). No fees, redraws, extra repayments or offset facility charges. The offset balance is not drawn down for spending. The monthly addition increases the offset balance each month. Interest is calculated monthly on the reduced balance, not daily as many New Zealand banks calculate it; results are estimates, not bank-exact. Repayments are monthly only. Payments, interest, balances and totals are estimates rounded separately for display. Calculations use unrounded payments and interest, so displayed payments may not sum to the total. This is not a lender cash-flow schedule. Amounts over 90 trillion are past what this calculates.
Source: your own figures · no market rate assumedUsing New Zealand rules
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What an offset account does

An offset account is a savings or everyday account linked to your home loan. The bank reduces the interest charged on your mortgage by the amount sitting in the offset account, but the money stays in your account and stays available for spending.

The saving is the interest you did not pay, not interest earned. There is no interest paid on the offset account itself, so no tax is owed on it. The benefit is the same as earning the mortgage rate, tax-free.

Common questions

Does the offset account earn interest?
No. An offset account earns no interest of its own. What it saves is the interest you did not pay on your mortgage. That saving is tax-free, because it is not income.
What if the offset covers the whole loan?
If the offset balance is at least the mortgage balance, no interest accrues at all and every payment goes entirely to principal. The loan pays off much faster than the original term.
What does the monthly addition to the offset do?
Any amount you add to the offset each month increases the offset balance and reduces the interest further. The offset itself earns no interest, but each addition shrinks the interest-bearing balance for the remaining term.

The rules behind this calculator

Written up, with the page each rule came from.
2 min read
Offset mortgages: how linked cash reduces interest
An offset mortgage keeps linked cash available while reducing the loan balance on which interest is charged; account rules and variable rates still matter.

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