• Home
  • Services
    • Guarantor Loans
    • Debt Consolidation
    • Home Loan Redraw and Cash Out
    • Home Loan Refinancing
    • LMI Waiver for Financial Professionals
    • LMI Waiver for Health and Medical Professionals
    • LMI Waiver for Legal Professionals
    • Mortgages for Doctors
  • Calculators
    • Borrowing Power Calculator
    • Extra Repayment Calculator
    • Home Loan Offset Calculator
    • How Long To Repay Calculator
    • Income Annualisation Calculator
    • Income Tax Calculator
    • Interest-Only Mortgage Calculator
    • Loan Repayment Calculator
    • Lump Sum Repayment Calculator
    • Mortgage Switching Calculator
    • Split Loan Calculator
    • Stamp Duty Calculator
Menu
  • Home
  • Services
    • Guarantor Loans
    • Debt Consolidation
    • Home Loan Redraw and Cash Out
    • Home Loan Refinancing
    • LMI Waiver for Financial Professionals
    • LMI Waiver for Health and Medical Professionals
    • LMI Waiver for Legal Professionals
    • Mortgages for Doctors
  • Calculators
    • Borrowing Power Calculator
    • Extra Repayment Calculator
    • Home Loan Offset Calculator
    • How Long To Repay Calculator
    • Income Annualisation Calculator
    • Income Tax Calculator
    • Interest-Only Mortgage Calculator
    • Loan Repayment Calculator
    • Lump Sum Repayment Calculator
    • Mortgage Switching Calculator
    • Split Loan Calculator
    • Stamp Duty Calculator
the mortgage agency logo
  • About
  • Blog
  • Contact
Menu
  • About
  • Blog
  • Contact
the mortgage agency logo
  • About
  • Calculators
    • Borrowing Power Calculator
    • Extra Repayment Calculator
    • Home Loan Offset Calculator
    • How Long To Repay Calculator
    • Income Annualisation Calculator
    • Income Tax Calculator
    • Interest-Only Mortgage Calculator
    • Loan Repayment Calculator
    • Lump Sum Repayment Calculator
    • Mortgage Switching Calculator
    • Split Loan Calculator
    • Stamp Duty Calculator
  • Contact
  • Services
    • Home Loan Refinancing
    • LMI Waiver for Financial Professionals
    • LMI Waiver for Health and Medical Professionals
    • LMI Waiver for Legal Professionals
    • Mortgages for Doctors
  • Blog
Menu
  • About
  • Calculators
    • Borrowing Power Calculator
    • Extra Repayment Calculator
    • Home Loan Offset Calculator
    • How Long To Repay Calculator
    • Income Annualisation Calculator
    • Income Tax Calculator
    • Interest-Only Mortgage Calculator
    • Loan Repayment Calculator
    • Lump Sum Repayment Calculator
    • Mortgage Switching Calculator
    • Split Loan Calculator
    • Stamp Duty Calculator
  • Contact
  • Services
    • Home Loan Refinancing
    • LMI Waiver for Financial Professionals
    • LMI Waiver for Health and Medical Professionals
    • LMI Waiver for Legal Professionals
    • Mortgages for Doctors
  • Blog
  • Book in your Free discovery session now!
Home Loan Tips,Loan Tips
/
June 16, 2021

The Essential Guide to Split Home Loans

Tony Xia
3-1

SHARE

If you’re shopping around for a home loan but can’t settle on whether a fixed interest rate or a variable interest rate would work better for you, there could be a solution – split home loans.

A split loan essentially allows you to use both interest rates. So, could it be the best of both worlds? Well, there are a few factors to consider.

To help you weigh up your options, we’ve put together this article that discusses:

  • what a split home loan is;
  • how fixed rates and variable rates work;
  • how a split mortgage works; and


things to consider before opting for a split home loan.

What Is a Split Loan?

Contrary to what the name might lead you to believe, a split home loan is not a type of loan.

Instead, a split home loan refers to dividing a portion of the loan into two parts, each with a different interest rate: fixed or variable.

So, to understand what a split home loan is, you first need to understand the difference between a fixed and variable rate for home loans.

1-2

What Is a Fixed Rate Mortgage?

With a fixed rate home loan, the interest rate remains the same for the entire duration of the fixed term agreed on.

So, the interest rate you agree upon when signing on the dotted line is the interest rate maintained throughout your home loan’s lifetime.

A fixed-rate loan’s main advantage is that it gives you the certainty of what your repayments will cost for a while because your interest rate is guaranteed not to go up or down during the fixed term.

However, there’s always a chance that markets could go down, and you’ll be stuck with a higher interest rate.

Fixed rate home loans don’t offer some of the features that variable rate loans do, such as making additional payments to your principal, if they do, there would normally be a limit.

What Is a Variable Interest Rate?

A variable rate home loan means a fluctuating one – the interest rate rises and falls over the life of your mortgage.

Interest rates can change in response to the Reserve Bank changing the official cash rate, or it may merely be a business decision by your financial institution.

The main advantage of a variable rate loan is flexibility, but this won’t necessarily work if you’re on a tight budget and need your payments to stay constant.

This option commonly comes with beneficial features such as an offset account or a redraw facility.

So, How Does Splitting Your Home Loan Work?

Splitting your home loan offers borrowers the best of both fixed and variable rate worlds.

This strategy effectively splits a home loan into two completely separate loans. Most lenders will give you the freedom to choose how you would like to divide the split, for example, 60/40.

Each portion of the loan will have its own fixed and variable interest rate.

So, if you have a total home loan of $100,000 remaining and choose a split mortgage of 60/40, one portion of the loan amounting to $60,000 will charge interest at a fixed rate, and the other portion of the home loan amounting to $40,000 will have a variable rate that will fluctuate if interest rates rise or fall.

You then pay off those two loans concurrently through a split home loan. You can choose whether you would like the mortgage repayments to go off on the same day or not.

If you have extra money that you would like to contribute, you can do so into the variable rate home loan. Or, you can make use of the offset account or redraw facility for effective saving.

Things To Consider Before Opting for a Split Home Loan

The most obvious thing to consider is whether your chosen lender offers the option of splitting your home loan.

If they don’t and you have your heart set on a split mortgage, consider looking around for lenders that do and then compare prices and features.

Before deciding how you want to split your home loan, be sure to use a split loan calculator. You can either contact a mortgage broker for assistance or make use of an online split loan calculator. This way, you can determine which portion of the loan will require what repayments and interest rate.

If you are unsure about whether a variable or fixed interest rate is best for you, a split mortgage is a great option that provides flexibility. But, it could land up being more complex and costly in the long run to try and balance two different home loans at once.

When it comes to home buying, it’s always in your best interest to consult a mortgage broker before making any decisions, during the applications and throughout the loan duration.

Key Takeaways

To split your home loan, you need to begin by understanding the difference between fixed and variable interest rates.

A successful split home loan lies in using each of the interest rates to your advantage. Be sure to check what features are available to the borrower should you need them and make use of them appropriately.

For example, if you want to make additional payments, doing so into your fixed-rate loan account could result in penalty fees as it doesn’t offer those features.

As a borrower, it is always necessary to take advice from a mortgage broker when making large financial decisions.

At the Mortgage Agency, we specialise in determining:

  • whether a split loan is a good option for you personally;
  • the present market and whether a split loan is a good idea in the current climate; and
  • how you should structure your fixed and variable rate percentages if you do choose a split loan.


Contact us today, and one of our experts can help you develop a personalised plan to best suit your financial needs and goals.

Disclaimer:

Please note that every effort has been made to ensure that the information provided in this guide is accurate. You should note, however, that the information is intended as a guide only, providing an overview of general information available to property buyers and investors. This guide is not intended to be an exhaustive source of information and should not be seen to constitute legal, tax or investment advice. You should, where necessary, seek your own advice for any legal, tax or investment issues raised in your affairs.

About Tony Xia

Having worked in the customer service and finance industry since 2011, our Director Tony Xia and his team’s highest priority is to cultivate a long-lasting relationship with clients based on trust and respect at The Mortgage Agency.

Related

Top 4 Questions To Ask Your Mortgage Broker

July 24, 2022
/
Mortgage Broker
Tony Xia
high lvr home loans

What Is An Interest-Only Home Loan & How Does It Work?

July 24, 2022
/
Investment Property Loan
Tony Xia

Breaking Into Property Investment—How A Broker Can Help

July 7, 2022
/
Investment Property Loan
Tony Xia

Borrowing Power: How Much Can I Borrow For My Mortgage?

June 24, 2022
/
Loan Tips
Tony Xia
key with a mini house

How Much Can I Borrow With A Guarantor Mortgage?

June 21, 2022
/
Loan Tips
Tony Xia
key with a mini house

What Happens When You Pay Off Your Mortgage?

June 21, 2022
/
Mortgage Broker
Tony Xia

Everything You Need to Know About a Pre-Approval Home Loan

April 1, 2022
/
Home Loan Tips
Tony Xia
first home buyer mortgage broker

How to Choose a First Home Buyer Mortgage Broker Suited To You

March 17, 2022
/
Mortgage Broker
Tony Xia
land loan

The Ultimate Guide on Land Loans

March 17, 2022
/
Loan Tips
Tony Xia
rental tax

How Is Rental Income and Loss Taxed?

November 15, 2021
/
Rental Tax
Tony Xia

Top 4 Questions To Ask Your Mortgage Broker

July 24, 2022
/
Mortgage Broker
Tony Xia
high lvr home loans

What Is An Interest-Only Home Loan & How Does It Work?

July 24, 2022
/
Investment Property Loan
Tony Xia

Breaking Into Property Investment—How A Broker Can Help

July 7, 2022
/
Investment Property Loan
Tony Xia

Borrowing Power: How Much Can I Borrow For My Mortgage?

June 24, 2022
/
Loan Tips
Tony Xia
key with a mini house

How Much Can I Borrow With A Guarantor Mortgage?

June 21, 2022
/
Loan Tips
Tony Xia
key with a mini house

What Happens When You Pay Off Your Mortgage?

June 21, 2022
/
Mortgage Broker
Tony Xia
Preferred partners
anz logo
ing logo
better choice logo
adelaide logo
auswide-bank-logo
beyond bank logo
bank australia logo
bank of sydney
bluebay homeloans logo
bluestone logo
bmm logo
citibank logo
cba logo
emoney logo
equifax logo
Firstmac-Logo-2016-Copy
fms logo
galilee logo
Heartland Finance logo
heritage
illion logo
get capital logo
latitude logo
latrobe logo
Macquarie_Bank_Logo_MBVert_BLK
me bank logo
mezy mortgage logo
mkm logo
movbe bank logo
mystate bank logo
st george
paramount logo
pepper money logo
virgin logo
plenti logo
qudos bank logo
resimac logo
suncorp bank logo
thinktank logo
ubank-logo2
victorian mortgage group logo
westpac logo
wisr
WLTH logo

Speak to the mortgage agency today

Talk to us now
hte mortgage agency footer
  • Home
  • About
  • Calculators
  • Services
  • Locations
  • Blog
  • Contact
Contact Us

Bella Vista Office

  • 217/14 Lexington Drive, Bella Vista, NSW, 2153
  • 0423 718 612

Parramatta Office

  • 19/103 George St, Parramatta NSW 2150
  • 1800 242 234

Penrith Office

  • 95b Station St, Penrith NSW 2750
  • 1800 146 759

Sydney Office

  • Seabridge House, Suite 120/377 Kent St, Sydney NSW 2000
  • 1800 146 759

Serving The Wider Sydney Area

  • Canterbury-Bankstown
  • Eastern Suburbs
  • Forest District
  • Greater Western Sydney
  • Hills District
  • Inner City
  • Inner West
  • Northern Beaches
  • Northern Sydney
  • St George
  • South-Western Sydney
  • Sutherland Shire
the mortgage agency logo
Tony Xia is A Credit Representative (477089) Of Mortgage Specialists Pty Ltd ACN 050 601 093 (Australian Credit Licence 387025)
Facebook-f Linkedin-in Instagram
Copyright @ 2022
  • Terms and Conditions
  • Privacy policy
  • Website Safe and Secure
  • Made With
  • By Digital Recipe