What are Offset Loans and Revolving Credit?
Offset loans and revolving credit can help reduce interest costs while giving you greater flexibility with your finances.
Offset Home Loan
Funds held in eligible savings and everyday accounts can be used to offset the balance of a floating-rate home loan. You only pay interest on the difference between your home loan balance and the total balance of your linked accounts, although you will generally not earn interest on the savings used for offsetting. This can help reduce your interest costs and potentially shorten your loan term.
You can make lump-sum repayments or increase your repayments without early repayment charges. Offset home loan interest rates are variable and may change with market conditions, and repayments can generally be made weekly, fortnightly or monthly. Your linked accounts remain separate, allowing you to manage your money as usual. Multiple eligible accounts may also be linked to increase the amount offset against your home loan. Banks such as BNZ, Westpac, Kiwibank and ICBC offer offset home loan products.
Revolving Credit
Revolving credit combines part of your home loan with an everyday transactional account. Your salary or other income can be paid directly into the account, immediately reducing the outstanding balance. If you manage your finances carefully, this can help reduce interest costs and potentially repay your home loan sooner, while still giving you access to funds when needed.
You only pay interest on the outstanding balance, and there are generally no fixed repayments. You can deposit or withdraw funds within your approved credit limit, while the interest rate is variable and may change with market conditions. Revolving credit is available from a range of major banks, although lending limits and product features vary between lenders.