How an offset mortgage works
Your savings sit in a linked account and are "offset" against your mortgage balance, so you only pay interest on the difference. You keep access to your savings, and the benefit is effectively tax-free interest at your mortgage rate. The best offset mortgage suits those with meaningful savings who want flexibility.
1. Offset to reduce monthly payments
Your savings lower the interest charged, cutting your monthly payment. Best for those who want lower outgoings while keeping savings accessible for emergencies.
2. Offset to shorten your term
Keep payments the same and let the saved interest reduce your balance faster, clearing the mortgage years early. Best for disciplined borrowers focused on becoming mortgage-free sooner.
3. Offset for higher-rate taxpayers
Because the benefit is effectively interest at your mortgage rate with no tax, offsetting can beat taxed savings for higher and additional-rate taxpayers. Best for higher earners with savings sitting in taxable accounts.
4. Offset for the self-employed
Money set aside for tax bills can offset your mortgage until it's due, working harder in the meantime. Best for the self-employed and company directors holding tax reserves.
Who benefits most
- Savers with a meaningful balance relative to the mortgage
- Higher-rate taxpayers (effectively tax-free benefit)
- The self-employed holding tax money
- Those wanting savings access plus mortgage savings
How to find the best offset mortgage
Offset deals are a niche with fewer lenders, so whole-of-market advice helps you compare rates and features. Find a mortgage broker through Nesto — free, no obligation.
Frequently asked questions
How does an offset mortgage save money?
Your linked savings reduce the balance you pay interest on, so you pay less interest while keeping access to the savings.
Who benefits most from offsetting?
Savers with a meaningful balance, higher-rate taxpayers (the benefit is effectively tax-free), and the self-employed holding tax money.
Can I still access my savings?
Yes — that's the appeal. Your savings stay accessible; they just reduce your mortgage interest while they sit there.
Should I reduce payments or the term?
Reducing the term clears the mortgage faster and saves the most interest; reducing payments helps monthly cash flow. Many lenders let you choose.
Are offset rates higher?
Sometimes slightly, so weigh the rate against the offset benefit. For savers with a good balance, the savings often outweigh any premium.