What Is an Offset Mortgage — and Can You Get One in Canada?
In the UK and Australia, your savings can shrink the balance you pay interest on. Canada doesn’t have that exact product, but it has something close. We even wrote a whole book about it, From Debt to Zero, an Amazon bestseller in Canada’s mortgage category. Here’s how it works, what it really costs, and how to tell whether it beats a regular mortgage for you.
Quick Answer
An offset mortgage lets the cash in your bank account reduce the balance you pay interest on. Canada has no true UK-style version with a separate linked savings account. The closest is an all-in-one account such as Manulife One, where your income lands directly against the debt. It usually carries a higher rate, so the money working against your balance has to save you more than that higher rate costs. We can help you run the numbers.
Why is your emergency fund costing you money?
Picture a household with $500,000 left on the mortgage and $50,000 in a savings account for emergencies. The savings earn 2%. That interest is taxed, so at a 28.2% marginal rate they keep about 1.44% after tax. Meanwhile, the mortgage charges interest on every dollar of the $500,000 — including the $50,000 sitting in their own savings account.
That gap is what an offset mortgage is designed to close. Instead of your savings earning a little and paying tax on it, they sit against your mortgage and stop it from charging interest on that part of the balance. A dollar that saves you interest isn’t taxed, because it was never income.
It sounds like an easy win. In Canada it isn’t automatic, and the reason is the whole point of this guide: a lower rate is not the same as a lower cost. The important part is how much money works against the balance, and for how long.
5.97%
What a savings account would need to pay, before tax
To match a dollar working against a 4.24% mortgage, at a 28.2% marginal rate.
1.44%
What 2% savings really pays
After tax at a 28.2% marginal rate (BC, taxable income $58,523–$100,728 in 2026).
How does an offset mortgage work?
In the UK and Australia, an offset mortgage pairs your mortgage with a linked savings or chequing account. The lender adds up the two and charges interest only on the difference: loan balance minus account balance. Your savings earn no interest of their own, but they stay yours, in a separate account you can spend from.
You keep making the same mortgage payment. Because less of it goes to interest, more of it goes to principal, and the loan is paid off sooner. Here is the same money in both setups:
| Same money | Regular mortgage + savings | Offset mortgage |
|---|---|---|
| Mortgage balance | $500,000 | $500,000 |
| Savings | $40,000, earning taxable interest | $40,000, earning nothing |
| Balance charged interest | $500,000 | $460,000 |
| What each saved dollar does | Earns the savings rate, minus tax | Saves the mortgage rate, tax-free |
In Canada, the closest version puts your mortgage and your chequing account in one account, and your income is deposited straight into it. Every dollar deposited reduces your mortgage balance and the interest you pay your bank. It works with savings, bonuses and any income left over after expenses. Interest is calculated daily, so every dollar starts saving interest the day it lands.
Does Canada have offset mortgages?
Not under that name, but it is very close. The five big banks don’t offer a mortgage with a separate linked savings or chequing account netted against it. What Canada has is the Manulife One all-in-one account: your mortgage, a line of credit and your everyday banking merged into one account. Your pay is deposited straight into it, so it reduces the debt the day it lands, and you spend from the same account.
The effect on interest is the same idea: money that would otherwise sit in the bank works against the balance. When we talk about an offset mortgage at Mortgages Lab, this is the structure we mean. The difference is that your money doesn’t sit beside the debt; it pays the debt down, and you can get it back by re-borrowing up to your limit, for example in an emergency. You keep your liquidity, but now your money works for you and not for the bank.
Not every product that combines a mortgage and a line of credit works this way. Here is how the common ones compare:
| Product | How it’s built | Does your everyday money cut the interest? | Borrowing limits |
|---|---|---|---|
| Manulife One | One main account holding the mortgage, a line of credit and your banking. Up to 15 tracking sub-accounts and 5 term sub-accounts, which can be fixed or variable. | Yes, automatically. Deposits reduce the balance immediately; interest is calculated daily and charged monthly. | Up to 80% of your home’s value; anything above 65% goes into an amortizing term sub-account, paid down on a fixed schedule like a regular mortgage instead of staying revolving. Requires at least 20% down or 20% equity. |
| National Bank All-in-One | A home equity line of credit tied to your banking, which can be combined with a traditional fixed or variable mortgage portion. The line is priced at prime + 1% (September 2026). | Partly. Money deposited to the line pays it down like any repayment, but National Bank states that credit balances are not offset against debit balances. | Up to 65% of the property’s value as a line of credit alone, or 80% combined with a mortgage portion. |
| Readvanceable plans at the big banks (e.g. RBC Homeline, TD FlexLine) | A mortgage and a line of credit under one registration. Paying down the mortgage frees up room on the line. | No. The mortgage and the line are tracked as separate debts. Money in your chequing account does nothing until you move it there yourself. | Revolving portion up to 65% of your home’s value; up to 80% in total. |
Not the same “offset” as rental offset
Why is the rate higher on an offset mortgage, and is it worth it?
The rate on an offset mortgage is higher, and it mostly comes down to where the lender gets the money. A regular mortgage can be insured and pooled into government-backed securities, some of the cheapest money a lender can raise. Since April 2011, a line of credit secured by your home can’t carry government-backed insurance, so it is shut out of that funding. The lender pays more for the money, and prices in the risk of a balance that never has to reach zero.
But the most important point for you is whether it helps you pay less interest to the bank. I’ll tell you up front: if your goal is just to make the minimum mortgage payment, an offset mortgage will not work for you. But if you have cash sitting around, or you make more than you spend every month, an offset mortgage can work wonders. It forces a lower balance, which cuts the interest you pay the bank, and at the same time it cuts the number of years until your mortgage is paid off in full.
Take a $500,000 mortgage at 4.24% with 25 years left, against an offset account at 4.95%. Negotiating a quarter point off the regular rate would save about $20,450 over those 25 years. The offset account, with $1,000 a month left over, saves several times that: every dollar left over works against the balance, and unlike a prepayment on a regular mortgage, you can still get it back. The savings from negotiating a lower rate are not even close. If you want all the details, they’re in the book, From Debt to Zero.
$74,969
Saved with $1,000 a month left over
And debt-free 8 years 5 months sooner, after the higher rate and the account fee.
$144,677
Extra cost with nothing left over
Minimum payments only: the higher rate on the whole balance costs more than it saves.
A $500,000 balance with 25 years left: a regular mortgage at 4.24% paid on schedule, against an offset account at 4.95% (prime + 0.50%) with an illustrative $16.95 monthly fee. Both rates held constant. Run your own numbers below.
How much do your savings actually help you save on your mortgage?
Do you usually keep money sitting in your savings or chequing account? If so, how much could you save by using an offset mortgage instead? The calculator below will help you answer that question.
Your Savings, Working Against Your Mortgage
Enter the money you usually keep in your savings and chequing accounts, and your mortgage.
Savings, emergency fund and the average balance of your chequing account.
Your remaining amortization.
Before tax. A chequing account usually pays nothing.
Federal + provincial, on your next dollar of income.
Over 25 years, your $50,000 could save you about:
$35,612
This is what your savings could save you if they worked against your mortgage instead of sitting in the bank. Interest you don’t pay isn’t income, so there’s no tax on it.
| Each year | In savings | Against the mortgage |
|---|---|---|
| Rate that counts | 1.44% after tax | 4.28% tax-free |
| Your cash earns or saves | $718 | $2,142 |
| Savings account needed to match | 5.97% before tax | |
One thing this doesn’t include: an offset mortgage usually charges a higher rate, on your whole balance. The next calculator weighs that against what you save.
Estimates only. A simple yearly estimate: the interest your cash avoids at your mortgage’s effective rate (Canadian semi-annual compounding), minus what it earns in savings after tax, times the years entered. It doesn’t count compounding or your balance going down over time.
Do you have disposable income that could help with your new offset mortgage?
Perhaps you work, your spouse works, you earn tips, bonuses or overtime, or maybe you own a business that is doing well. How can you use that extra money to reduce the cost of your offset mortgage? Is it worth it? Are the potential savings enough to justify the higher interest rate? Here is a calculator to help you test different scenarios.
Your Money Left Over, Against Your Mortgage
Every month, your mortgage payment and whatever is left over go into the offset account.
Variable, usually prime plus a margin.
After your mortgage payment and all your expenses: a second income, tips, bonuses, overtime.
Illustrative. Fees vary by lender.
With the offset mortgage you could save about:
$74,969
And you’re debt-free 8 years 5 months sooner. That’s after the higher rate and the account fees.
| Over the life of the debt | Regular mortgage | Offset mortgage |
|---|---|---|
| Rate | 4.24% | 4.95% |
| Paid in each month | $2,696 | $3,696 |
| Total interest | $308,666 | $230,324 |
| Account fees | $0 | $3,373 |
| Debt-free in | 25 years | 16 years 7 months |
Compared with a regular mortgage paid on schedule, with the money left over staying in your account. A regular mortgage also lets you prepay within yearly limits, but that money is locked into the house; in an offset account you can take it back out.
Estimates only. Assumes you move to the offset account at renewal, with no penalty, and that both rates stay the same; the offset rate is variable. The regular mortgage compounds semi-annually; the offset account charges interest monthly. You need at least 20% equity, and everything you put in the account has to fit within 80% of your home’s value, with no more than 65% revolving.
Can I use an offset mortgage if I have debts?
If you have other debts, you can use an offset mortgage to drastically reduce the interest you pay to your bank. Use the following calculator to run different test scenarios.
Your Mortgage and Your Debts, in One Account
Your mortgage and your other debts in one offset account, compared with paying each one separately.
Variable, usually prime plus a margin.
After your mortgage payment and all your expenses: a second income, tips, bonuses, overtime.
Illustrative. Fees vary by lender.
With the offset mortgage you could save about:
$33,932
And you’re debt-free 6 years sooner. That’s after the higher rate and the account fees.
| Over the life of the debt | Regular mortgage | Offset mortgage |
|---|---|---|
| Rate | 4.24%, debts at their own rates | 4.95% on everything |
| Paid in each month | $3,596 | $3,596 |
| Total interest | $322,808 | $285,011 |
| Account fees | $0 | $3,865 |
| Debt-free in | 25 years | 19 years |
Compared with keeping your mortgage on schedule and paying each debt on its own payment. Rolling your debts into your mortgage with a refinance is another way to a lower rate; we can compare both for you.
Estimates only. Assumes you move to the offset account at renewal, with no penalty, and that both rates stay the same; the offset rate is variable. The regular mortgage compounds semi-annually; the offset account charges interest monthly. You need at least 20% equity, and everything you put in the account has to fit within 80% of your home’s value, with no more than 65% revolving.
What rules limit an offset mortgage account?
The limits come from OSFI, the regulator of federally regulated lenders, through its mortgage guideline B-20. In June 2022 OSFI clarified how it treats products that combine a mortgage with a line of credit, and lenders had to comply by the end of their 2023 fiscal year:
- 65% of your home’s value is the most that can sit in the revolving part, the part you can pay down and borrow again.
- 80% in total, mortgage and line of credit combined, the legal maximum for any uninsured mortgage.
- Anything between 65% and 80% must amortize like a regular mortgage, with scheduled principal payments, and cannot be re-borrowed once repaid.
The revolving part of these products can’t carry mortgage default insurance, so you need at least 20% equity or a 20% down payment. You also have to qualify for the limit, and lenders stress-test the application much as they would a regular uninsured mortgage.
These are rules for banks and other federally regulated lenders. Provincially regulated credit unions set their own limits, which can differ. The details of how the line of credit side works are in HELOC vs Re-advanceable Mortgage.
Two more things to know before you sign: the rate is variable, so your cost moves with prime, and these accounts are registered as a collateral charge, which makes switching to another lender later cost more.
65%
Maximum revolving limit
Of your home’s value, at federally regulated lenders.
80%
Maximum total borrowing
Mortgage and line of credit combined.
20%
Minimum equity or down payment
The revolving part can’t be insured.
Who is an offset mortgage for, and who should avoid it?
The structure rewards two things: a lot of money moving through it, and the discipline to leave it there. Without both, the higher rate is a cost you pay for flexibility you don’t use.
It can work if you…
- Keep a large emergency fund or savings you would hold anyway
- Have your income paid into one account, with money left over every month
- Want every spare dollar against the debt without locking it away in prepayments
- Have at least 20% home equity and a good income
- Want to pay off your mortgage fast, not over 25 to 30 years
It does not work if you…
- Keep little cash on hand, so the rate premium costs more than the offset saves
- Aren’t disciplined with your money
- Care most about the mortgage rate, not about paying the bank the least interest
- Want the lowest mortgage payment possible
- Just want to follow the bank’s plan and pay it off over 25 to 30 years
How do you know if an offset mortgage works for you?
By doing your numbers. Send us “Hi” on WhatsApp at +1 778 588 7000 and choose Lower rate ≠ lower cost from the menu. Our bot calculates your Cost of Credit, the total interest you are on track to pay, and shows you how it changes when the money you have left over each month works against your mortgage. If you’ve chatted with us before, the bot may offer you a time with Camilo instead, to go through your numbers together.
You chat with our AI assistant; a human agent can take over anytime, just ask.
Say Hi on WhatsAppFrequently Asked Questions
Go Deeper on What Matters to You
HELOC vs Re-advanceable Mortgage
How the line of credit side of these products works, and the 65% / 80% limits in practice.
Read GuideBest Mortgage Rate vs. Cost of Credit
Why the lowest rate isn’t always the cheapest mortgage, with the math behind it.
Read GuideSmith Maneuver vs From Debt to Zero
The same account, two opposite goals: pay the debt off, or keep it and invest.
Read GuideLump Sum Prepayment vs TFSA
Where a spare dollar does more: against your mortgage or growing tax-free.
Read GuideWhy Your Principal Changes Every Month
Semi-annual compounding explained, and why it matters when you compare rates.
Read GuideStandard vs Collateral Mortgages
Why combined mortgage-and-credit products can cost you when you want to switch.
Read Guide
Camilo Rodriguez is the Founder of Mortgages Lab, a licensed mortgage broker with over 23 years of experience helping Canadians achieve financial freedom. He has trained 100+ mortgage agents across Canada and is Past President of The Canadian Mortgage Broker Association - BC. He is the author of "From Debt to Zero," a guide to becoming mortgage free.
P.A.Y.O.F.F™, L.A.B™, M.A.P™ are Trademarks of Mortgages Lab®
Financial Disclosure
This page contains informational content only and does not constitute financial advice. Mortgage rates shown are sourced from publicly available lender data and may change without notice. Always verify rates directly with the lender. Mortgages Lab may receive compensation from partner lenders, which does not influence our editorial content or rate rankings. Built on Real Experience — 23+ years of working with real mortgage scenarios and helping Canadians achieve financial freedom.
Financial disclosure: Rates and product features change. Figures in this article reflect the big banks’ prime rate after the Bank of Canada’s September 2, 2026 rate decision, National Bank’s published All-in-One pricing, our own rate data as of September 22, 2026, and OSFI’s Guideline B-20 clarification of June 2022. Product descriptions are based on published lender information and may not reflect every feature or fee. Offset and all-in-one rates are variable; the examples hold them constant. This is general information, not tax or legal advice. Confirm current rates, fees and eligibility with the lender or a licensed mortgage broker before deciding. Mortgages Lab may receive compensation from lenders featured on this site.
Lower Rate ≠ Lower Cost
Whether an offset mortgage beats a regular one comes down to how your money moves. Say Hi on WhatsApp to run your Cost of Credit, or talk it through with a broker who runs this math every week.