Mortgage optimizer
Split your loan between standard and offset or revolving credit, add extra payments, and see a full restructuring plan — with automatic rate adjustments as your LVR improves.
How mortgage optimisation works in New Zealand
Most New Zealand borrowers put their entire loan on a single fixed rate and never think about it again. But splitting your mortgage between different account types — standard, offset and revolving credit — can save tens of thousands in interest and shave years off your loan. This guide explains how each strategy works and when to use it.
What is mortgage splitting?
Mortgage splitting means dividing your home loan into two or more “tranches” — each with its own rate type, term or account structure. For example, you might put 70% of your loan on a low fixed rate for repayment certainty, and 30% on a revolving credit facility so everyday savings reduce your interest daily. New Zealand banks like ANZ, ASB, BNZ, Westpac and Kiwibank all allow split structures at no extra cost.
Why splitting matters
A single-rate mortgage is simple but inflexible. Splitting lets you lock in certainty where you need it, keep flexibility where it counts, and use your savings to offset interest — all at the same time. Even a modest split can save $10,000–$30,000 over a 25-year loan depending on how much cash you keep in offset or revolving accounts.
Mortgage optimisation strategies compared
There are three main ways to structure a split mortgage in New Zealand. Each uses a different flexible account alongside your standard fixed or floating portion.
Standard + Offset
An offset account links your savings to your mortgage. If you owe $500,000 and have $60,000 in savings, you only pay interest on $440,000. Your savings stay accessible — you can withdraw at any time — but every dollar parked there reduces your daily interest charge.
- Best suited for
- Borrowers with significant savings or irregular income (e.g. contractors, business owners) who want to keep cash liquid while minimising interest.
- Available from
- ANZ (floating offset), BNZ, Westpac and selected non-bank lenders. Most require the offset portion to be on a floating rate.
Standard + Revolving Credit
A revolving credit facility works like a large overdraft secured against your home. Your salary goes in, reducing the balance, and you draw on it for daily expenses. The key is that interest is calculated on the daily closing balance — so even temporary deposits reduce your costs.
- Best suited for
- Disciplined borrowers with regular income who can keep spending in check. Ideal for salary earners who want their pay to work harder between pay cycles.
- Available from
- Most major NZ banks — ANZ, ASB, BNZ, Kiwibank and Westpac. Typically charged at the floating rate or a small premium.
Advanced borrowers can combine all three: a large fixed portion for certainty, a smaller offset for liquid savings, and a revolving facility for everyday cash flow. This is the most flexible structure but requires more active management. Our optimizer models multi-split scenarios automatically.
Standard split strategy — Comparing all three approaches
The optimizer runs a month-by-month simulation of your mortgage over the full loan term. Here's what happens behind the scenes:
- 1. Split your loan
- You choose how much to put on the standard (fixed) portion and how much on the flexible portion — offset or revolving credit. The optimizer lets you experiment with different splits instantly.
- 2. Model your cash buffer
- Enter your average savings balance (for offset) or the amount your salary cycles through (for revolving). The optimizer deducts this from the flexible balance each month when calculating interest.
- 3. Add extra repayments
- Any lump-sum or regular extra repayments are applied to the flexible portion first (since it has no break fees), then to the standard portion when it comes up for re-fixing.
- 4. Automatic LVR adjustments
- As you repay principal and your LVR drops below key thresholds (80%, 70%, 60%), the optimizer applies lower interest rates automatically — just as your bank would at renewal. This gives you a realistic projection, not an overly conservative one.
- 5. Compare against a single-rate baseline
- The optimizer shows you a side-by-side comparison: total interest with optimisation vs. a plain fixed-rate mortgage. The difference is your projected saving.
Tip — start with a small flexible portion
If you're new to mortgage splitting, start with 10–20% on revolving credit and the rest on a competitive fixed rate. As you get comfortable managing cash flow, you can increase the flexible portion at your next re-fix date — with no break fees to worry about.
Offset account vs revolving credit — Which should I choose?
Both offset and revolving credit reduce your interest by leveraging your cash, but they work differently and suit different borrowers.
Offset Account
- How it works
- A separate savings account is linked to your mortgage. The balance is deducted from your loan principal for interest calculation purposes only — your actual loan balance doesn't change.
- Access to funds
- Full access to your savings at any time. Withdrawals simply increase the balance used for interest calculation.
- Tax advantage
- Because you're not earning interest on your savings, there's no interest income to pay tax on. The interest saving on your mortgage is effectively tax-free — a significant benefit for higher earners.
- Ideal balance
- $30,000+ in savings for meaningful impact.
Revolving Credit
- How it works
- Your mortgage acts like a giant overdraft. Income goes in and reduces the balance; expenses go out and increase it. Interest is calculated on the daily closing balance.
- Access to funds
- You can draw up to the facility limit at any time via EFTPOS, direct debit or online transfer — no separate account needed.
- Discipline required
- Because every purchase increases your mortgage balance, you need solid budgeting habits. Without discipline, it's possible to end up paying more interest, not less.
- Ideal for
- Salary earners with steady fortnightly or monthly income.
Can you have both?
Yes. Some borrowers use revolving credit for everyday cash flow (salary in, expenses out) and a separate offset account for longer-term savings like an emergency fund or investment deposit. This keeps your spending and savings separate while both reduce your mortgage interest.
Common mortgage splitting mistakes
Restructuring doesn't have to mean refinancing with a new bank. Most changes can be made with your existing lender at no cost if you time them correctly.
When your fixed term expires, you can renegotiate the split without any break fees. This is the ideal time to move a portion onto revolving credit or add an offset facility.
When your LVR drops below 80% (or 70%, or 60%), you qualify for lower rates. Ask your bank for a rate review — many won't offer it unless you ask.
Getting a pay rise, receiving an inheritance, or changing jobs are all good triggers to revisit your split. More income or a lump sum means more benefit from offset or revolving credit.
Frequently asked questions
How much can I save by splitting my mortgage?
It depends on the size of your loan, the cash you keep in offset or revolving accounts, and current interest rates. As a rough guide, a borrower with a $600,000 loan keeping $40,000 in an offset account could save $25,000–$50,000 in interest over 25 years and pay off their mortgage 2–4 years sooner.
Is revolving credit the same as a home equity line?
They're similar but not identical. In New Zealand, revolving credit (also called a “flexi” or “orbit” facility) is a portion of your home loan set up as an overdraft. It doesn't require a separate application like a home equity line — it's simply part of your existing mortgage structure.
Do I pay more in fees for a split mortgage?
Most NZ banks allow splits at no extra cost. Some charge a small annual fee ($30–$50) for a revolving credit facility or offset account. The interest savings almost always outweigh the fee — even with just $10,000 in the account.
Can I change my split without refinancing?
Yes. At your re-fix date, you can adjust the split between standard, offset and revolving portions with your existing lender — no new application, no new valuation. Mid-term changes to a fixed portion may attract break fees, which is why the optimizer plans changes around your re-fix schedule.
What happens to my offset savings if rates drop?
An offset account benefits you regardless of the rate — lower rates just mean a smaller absolute saving per dollar offset. If rates drop significantly, you might choose to re-fix the offset portion at the new lower rate and invest your savings elsewhere. The optimizer helps you model both scenarios.
How does the optimizer handle rate changes over time?
The optimizer tracks your LVR as you repay principal. When your LVR crosses a tier boundary (80%, 70%, 60%), it automatically applies the lower rate that your bank would offer at renewal. This means projections get more accurate over longer timeframes, not less.