An interest offset mortgage combines deposits and a mortgage in one line of credit account.

When the homeowner deposits funds (like a paycheque) into the account, that decreases (offsets) the principal owed–and hence the interest owed.  Unlike most mortgages, offset mortgages calculate interest daily as opposed to monthly. That ensures deposits immediately offset debt, with the aim being greater interest savings. 

(Note: The process also works in reverse. Whenever you borrow more from the account, interest starts being calculated the same day.)

National Bank’s All-in-One and Manulife’s One are two popular examples of offset mortgages.

Last modified: October 15, 2009