Split Rate Home Loans

Hedging your bets, the best of both worlds...

The ability to split a home loan into multiple loans that allows for a combination of both variable and fixed rates.

If you are unsure whether to go variable or fixed rate loan then a split loan is something to consider.

Split loans are a combination of variable and fixed rate loans. You can have a percentage of the loan as variable while the other percentage fixed. You can have half fixed and half variable, 70% variable and 30% fixed or any combination you prefer.

These loans are for borrowers who want to hedge their bets. They give the borrower the flexibility of a variable loan and the security of a fixed loan. Generally, taken out when the direction of interest rates are rising or when they have no clear direction.

Advantages

• Having part of you loan fixed protects against interest rate rises.

• If interest rates fall you also get the benefit of lower mortgage repayments.

• Additional repayments can be made into the variable portion as most lenders do not allow for extra repayments into fixed rate loans.

• Ability to use an offset account and redraw facility with the variable portion of the loan.

Disadvantages

• Cost of two loans may incur unnecessary fees such as set up and ongoing fees.

• Paying or exiting the fixed loan early can incur break fees.

Which Lenders Will Do Split Loans?

Each lender has their own version of a split loan. Some of the ways you can split a loan with various lenders can be as follows;

• Two separate loan accounts. This can prove to be expensive way to get a split loan.

• One loan split between variable and fixed loan with one application and ongoing fee for both.

• Professional packages allow for multiple loans with nil upfront fees for one annual fee.

• Which ever one you choose largely depends on the loan amount and your lending need.