What is a split rate home loan?
In a split rate home loan, your mortgage is split into one part fixed rate loan and one part variable rate loan, giving you the best of both worlds.
A fixed rate loan means your interest rate is locked in for a set period of time, while a variable rate loan means the amount of interest you pay will fluctuate with the official cash rate. A split loan gives you some predictability and security from the fixed portion of your loan, while the variable portion will provide some flexibility and allow you to benefit from lower interest rates.
You get to decide the ratio of fixed portion to variable portion, so you can choose to weight it more towards security or flexibility. We can help you decide how to best weight your loan, depending on your situation.
What are the benefits and drawbacks?
Split rate home loans can be a good choice for those who don’t understand the interest rate cycle very well, as it will protect you from the full effects of high interest rates, while making sure you don’t miss out on all the benefits of low interest rates, and give you some flexibility in your repayments.
The drawbacks include the usual downsides from each of these loan options – you won’t be able to make extra repayments on the fixed portion, nor will you benefit from low official rates. On the variable portion, your repayments will increase with a rise in interest rates. The other drawback is you may be charged account keeping fees on both parts of the loan – ending up with extra fees overall.
Applying for a split rate home loan
Getting approval for a split rate loan works the same as other loan products, meaning the two portions will be assessed together as a single product. For documentation purposes, the two portions will be treated separately.
We can help you decide if a split rate home loan is right for your circumstances.