--- title: Have your ‘savings’ account within your home loan description: If you have a mortgage and have a separate bank savings account you are doing the equivalent of driving a car on flat tyres. It works but not very well. image: https://blog.nzhl.co.nz/hubfs/piggy-bank-and-light-bulb-e1477454321999-448x350.jpg --- [0800 030 646](tel:0800030646) - Search - [Contact Us](https://nzhl.co.nz/contact-us/) - [Find Us](https://nzhl.co.nz/find-us/) - [Client Login](https://nzhl.co.nz/login/) [![NZHL](https://blog.nzhl.co.nz/hubfs/Nzhl_January2019%20Theme/Images/logo-footer-nzhl.png)](https://nzhl.co.nz/) - [Home Loans](https://nzhl.co.nz/home-loans) - - [Change to NZHL](https://nzhl.co.nz/home-loans/switch-to-nzhl/) - [Buying your first home](https://nzhl.co.nz/home-loans/first-home/) - [Buying your next home](https://nzhl.co.nz/home-loans/next-home/) - [Interest rates](https://nzhl.co.nz/home-loans/interest-rates/) - [Home Loan calculators](https://nzhl.co.nz/home-loans/tools-calculators/) - [FAQ](https://nzhl.co.nz/about-nzhl/faq/) - - [How much could I borrow?](https://nzhl.co.nz/home-loans/tools-calculators/) - [Where's my nearest office?](https://nzhl.co.nz/find-us/) - [How much deposit do I need?](https://nzhl.co.nz/home-loans/first-home/getting-a-deposit/) - [Insurance](https://nzhl.co.nz/insurance) - - [Your Life](https://nzhl.co.nz/insurance/your-life/) - [Your Health](https://nzhl.co.nz/insurance/your-health/) - [Your Home and Car](https://nzhl.co.nz/insurance/your-home/) - [Your Income](https://nzhl.co.nz/insurance/your-income/) - [Request a quote](https://nzhl.co.nz/insurance/request-a-quote/) - [FAQ](https://nzhl.co.nz/about-nzhl/faq/) - - [NEW! 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It works but not very well. There are 2 main reasons for this, taxation and interest rate. Currently a savings account will pay around 2.5% interest, while floating rates on mortgages are 5.5%. So, any extra money put into a mortgage will effectively give you a return of 5.5% (by avoiding having to pay that interest charge). You will also be taxed on interest earned while saving, so the 2.5% interest will likely be taxed at 30% meaning your effective interest rate will be 1.75%. The following tables illustrate the difference. I’ve used deposits of $200 a month, interest compounded monthly, and compared the results over 10 years: ### Savings Account | **Year** | **Year Deposits** | **Year Interest** | **Total Deposits** | **Total Interest** | | --- | --- | --- | --- | --- | | 1 |  $          2,400.00 |  $             22.87 |  $          2,400.00 |  $               22.87 | | 2 |  $          2,400.00 |  $             65.61 |  $          4,800.00 |  $               88.48 | | 3 |  $          2,400.00 |  $          109.11 |  $          7,200.00 |  $            197.59 | | 4 |  $          2,400.00 |  $          153.37 |  $          9,600.00 |  $            350.96 | | 5 |  $          2,400.00 |  $          198.42 |  $       12,000.00 |  $            549.38 | | 6 |  $          2,400.00 |  $          244.26 |  $       14,400.00 |  $            793.64 | | 7 |  $          2,400.00 |  $          290.90 |  $       16,800.00 |  $        1,084.54 | | 8 |  $          2,400.00 |  $          338.37 |  $       19,200.00 |  $        1,422.91 | | 9 |  $          2,400.00 |  $          386.68 |  $       21,600.00 |  $        1,809.59 | | **10** | ** $          2,400.00** | ** $          435.84** | ** $       24,000.00** | ** $        2,245.43** |   ### Mortgage Account | **Year** | **Year Deposits** | **Year Interest** | **Total Deposits** | **Total Interest** | | --- | --- | --- | --- | --- | | 1 |  $          2,400.00 |  $             72.72 |  $          2,400.00 |  $               72.72 | | 2 |  $          2,400.00 |  $          212.20 |  $          4,800.00 |  $            284.92 | | 3 |  $          2,400.00 |  $          359.54 |  $          7,200.00 |  $            644.46 | | 4 |  $          2,400.00 |  $          515.20 |  $          9,600.00 |  $        1,159.66 | | 5 |  $          2,400.00 |  $          679.64 |  $       12,000.00 |  $        1,839.30 | | 6 |  $          2,400.00 |  $          853.36 |  $       14,400.00 |  $        2,692.66 | | 7 |  $          2,400.00 |  $      1,036.88 |  $       16,800.00 |  $        3,729.54 | | 8 |  $          2,400.00 |  $      1,230.74 |  $       19,200.00 |  $        4,960.28 | | 9 |  $          2,400.00 |  $      1,435.55 |  $       21,600.00 |  $        6,395.83 | | **10** | ** $          2,400.00** | ** $      1,651.90** | ** $       24,000.00** | ** $        8,047.73** |   As demonstrated, putting the money into your mortgage is 3.5 times more effective than having it in your bank account. 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