iRefi Insider School – Utilising an Offset Mortgage

Let’s have a quick look at offset mortgages. So, with a normal mortgage, what you’re doing is paying interest on the whole loan amount. So, let’s say that you’ve got 500K of mortgage and what you’ve got is 200K of savings.

So, this is your loan amount, this is how much you’ve got in the bank as savings. What you’re doing is paying interest on 500K. So, you’re 200K of savings is not helping you pay less towards your interest repayments. Now, with our offset mortgage, let’s say 500K and you’ve got 200K of savings. Now, what you’re doing is you’re actually only paying on 300K.

So, what that means is you’re paying 200K of loan, you’re not paying interest on that, and your savings is effectively offsetting and making sure that your repayments are being brought down. This is, you know, BNZ has got Total Money, Westpac’s got the Choices Offset, Kiwibank got a product.

You know, it’s quite different from the revolving credit products offered by different banks. So, if you find yourself in a position where you’ve got, you know, meaningful savings and you’re not really sure what you should do with it or how you should allocate that capital, then you might want to consider using an offset account because they’re relatively simple but not all banks offer it.