"An offset mortgage setup can reduce the amount of interest you pay on your mortgage. Typically, interest is payable on the full amount of a loan. But by linking your loan to any savings or everyday accounts you already have, you pay interest on that much less. For example, someone with a $400,000 mortgage and $20,000 in savings would only pay interest on $380,000. Subtract the savings from the total loan amount, and you only pay interest on what’s left.
The more cash you keep across your accounts from day to day, the more you’ll save, because interest is calculated daily. Linking as many accounts as possible – whether from a partner, parents, or other family members – means even less interest to pay.
Advantage:
You pay less in interest and pay off your mortgage faster. Typically there is no fixed term.
Disadvantage:
The linked savings accounts do not earn any interest when they offset a loan. That said, interest on debt is typically higher than the interest you would earn on savings, which makes the offset worthwhile." Source:
https://sorted.org.nz/guides/home-buying/mortgage-types/
