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It is one of the most common questions we hear from clients looking to tackle their mortgage interest: "Should I set up a revolving credit facility, or an offset mortgage?"
Here is the secret most people don't realise: mathematically, they do the exact same thing.
Here is a straightforward look at how the two compare, how to figure out which one suits your financial habits, and the banks that currently offer them.
The psychology of your cash: one bucket or many?
The biggest day-to-day difference between revolving credit and an offset mortgage is simply how you interact with your money.
Revolving credit: the single pool
A revolving credit facility merges your home loan and your everyday transactional account into one single bucket. If you have a $50,000 limit and owe $40,000, your banking app simply shows an "Available Balance" of $10,000.
- The advantages: It is wonderfully simple. Your salary lands directly in the account, immediately reducing your loan balance and lowering daily interest charges. You can see your net financial position in one place.
- The challenge: It demands strict personal discipline. Because all your funds are pooled into one balance, you have to mentally track what that $10,000 is earmarked for. Is it for next month's council rates? An upcoming holiday? An emergency fund? If you are prone to impulse spending, seeing a five-figure available balance can make it tempting to overspend.
The offset mortgage: separate buckets working together
An offset mortgage keeps your home loan completely separate from your everyday savings accounts. Rather than blending your money, the bank allows you to link multiple transactional and savings accounts to your loan, using their combined balances to shield your debt from interest.
- The advantages: Ideal for anyone who uses "envelope" or "bucket" budgeting. You can keep one account for weekly living costs, a second for holiday savings, and a third for upcoming tax or maintenance bills. Your funds stay organised in their own folders, but they work together behind the scenes to offset your mortgage interest. Crucially, it removes the temptation of a large overdraft limit.
- The challenge: It requires a little more administration to manage multiple account balances, and you need to ensure your surplus cash remains in eligible linked accounts for the offset benefit to apply.
The Bank of Mum and Dad: keeping family money safe
If family members are helping you manage your mortgage, an offset mortgage offers a clear advantage over a revolving facility.
Many parents want to help their adult children get ahead on their home loan, but are understandably cautious about handing over a large lump sum. If parents transfer $50,000 into a child's revolving credit account, those funds mix directly with the child's daily money—meaning the money could be spent, intentionally or otherwise.
With an offset mortgage, eligible banks allow parents to link their own savings accounts to their child's home loan:
- Control stays with the parents: The savings remain in the parents' names, under their own bank login. Parents maintain full control of their money and can withdraw funds at any time.
- Structural separation: The physical cash never transfers into the couple's account or merges with the property's equity.
The bank catch: who actually offers what?
You might read through this comparison and decide an offset mortgage is the obvious choice. However, not every lender provides this facility.
Building the banking infrastructure to link multiple seperate accounts to a single mortgage ledger is technically complex. Because of this, availability across New Zealand differs significantly:
- Revolving credit: Widely available across almost all major New Zealand banks, including ANZ, ASB, BNZ, Westpac, and Kiwibank.
- Offset mortgages: Currently offered by a smaller group of lenders, primarily BNZ, Westpac, Kiwibank, and Bank of China.
If you currently bank with a lender that does not offer offset facilities (such as ANZ or ASB) and want to use a multi-account offset structure, you would typically need to refinance that portion of your lending to a bank that supports it.
The interactive test: feel the difference
Still not sure which approach fits your brain? Play with our two interactive simulators below.
Does seeing all your money pooled into one "Net Debt" tank make you feel anxious, or do you love the simplicity? Does managing three different account dials feel like too much admin, or perfect control?
2. The Offset Mortgage Simulator
Watch how moving money between your separate, organised buckets shields your total exposed debt. Notice how your monthly repayment stays completely fixed, but the amount of equity you build skyrockets as you add cash to the accounts.
Which option suits your financial style?
A revolving credit facility may suit you if:
- You have strong budgeting discipline and track your spending closely.
- You prefer the simplicity of managing a single primary bank account.
- You are comfortable mentally separating your savings goals without needing multiple physical accounts.
- You bank with a lender like ANZ or ASB and prefer not to shift your lending.
An offset mortgage may suit you if:
- You prefer clear separation and like dividing money into dedicated savings and bill buckets.
- You are self-employed and regularly hold funds for GST or provisional tax before paying Inland Revenue. (Always check with your accountant on the best way to structure business funds).
- Your parents or family members want to assist your mortgage interest without transferring ownership of their capital.
- You want to remove the day-to-day temptation of having a large overdraft limit visible on your phone.
The best of both worlds: splitting your loan
Whichever structure fits your lifestyle, it is uncommon to put an entire mortgage on a floating interest rate. Because variable rates are typically higher than fixed rates, keeping your whole loan on floating can be an expensive exercise.
A very practical approach is to split your mortgage:
- The fixed foundation (80% to 95%): Place the majority of your lending on competitive fixed terms for stability and lower baseline interest costs.
- The flexible portion (5% to 20%): Carve out a smaller slice on either a revolving credit or offset facility, sized to match the savings or cash flow surplus you realistically expect to hold over the next 12 to 24 months.
This allows your regular cash flow to work hard against your debt without exposing your entire balance to higher floating rates.
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