Buying a home is exciting, but choosing the right loan can make all the difference in your financial journey.
Split home loans give you a mix of stability and flexibility. By combining fixed and variable interest rates, you enjoy the benefits of both in one mortgage.
A split home loan divides your mortgage into separate accounts, applying a fixed rate to one part and a variable rate to the rest.
Splitting gives you budget certainty alongside helpful features. Each portion acts as an individual loan with its own rate and schedule under one main mortgage.
Fixed-rate portion
With a fixed rate, your interest rate stays locked for a set period, usually one to five years. Your repayments remain unchanged during this time, protecting you from rate rises.
For example, fixing 60% of a $600,000 loan keeps repayments on that $360,000 portion identical for the entire fixed term.
Variable-rate portion
The variable portion moves with market conditions and cash rate decisions by the Reserve Bank of Australia (RBA). This portion lets you make extra repayments, use a redraw facility or link an offset account to lower your interest.
There is no single formula for splitting a home loan. The right setup depends on your cash flow and expected extra savings.
50% fixed / 50% variable | Offers equal parts repayment security and flexibility. It is a good idea to consider this if you want rate protection and have ongoing savings |
80% fixed / 20% variable | Provides strong protection against rising interest rates. The smaller variable portion matches the extra savings you plan to pay off over the fixed term |
60% variable / 40% fixed | Suited for borrowers expecting rate cuts or planning extra lump-sum repayments while keeping a safety net on part of their debt |
Understand how various splits between fixed and variable rate loans will impact your repayments over the loan term.
A split loan can be structured to match your financial circumstances and goals, whether you’re a first-time buyer, an investor, or refinancing your current home loan.
Fixed-rate loans provide repayment certainty, protecting you from rate rises during the fixed-rate period. On the other hand, a variable loan offers the chance to make extra payments without penalty, potentially reducing your loan term.
Pros of a split loan | Cons of a split loan |
If interest rates rise, only your variable portion is affected. If interest rates fall, you still benefit from lower rates on your variable portion. | If market interest rates fall significantly, the fixed portion of your loan will not benefit from lower repayments. |
You can attach a 100% offset account or utilise a redraw facility against the variable portion. | You will receive statements showing separate loan balances, which requires tracking two repayment amounts. |
You can direct extra repayments or work bonuses into the variable side to clear debt faster without triggering fixed-rate early repayment fees. | If you refinance or sell your property during the fixed period, break costs may still apply to the fixed portion of the split. |
Comparing Product Types?
Read our guide on Fixed vs variable home loans to evaluate which setup suits your financial strategy.
Managing a split loan can be more straightforward with professional guidance.
We can provide insights into the different types of loans available and how to structure your split loan to best suit your financial circumstances.
What is the main advantage of a split loan?
The primary advantage is balancing repayment certainty with loan flexibility. You maintain predictable repayments on one portion while keeping access to features like offset accounts and penalty-free extra repayments on the rest.
Can I change the split ratio between fixed and variable during the loan term?
Changing your split ratio during an active fixed-rate period usually requires breaking the fixed contract, which can incur early repayment fees. Once your fixed term expires, you can adjust your split ratio without penalty.
Are split loans suitable for investment properties?
Yes. Investors frequently use split loans to lock in tax-deductible interest expenses on the fixed portion while directing surplus rental yield or cash into an offset account attached to the variable portion.
What happens when the fixed-rate period of a split loan ends?
When your fixed term ends, that portion automatically rolls over to the lender’s standard variable rate. Before it expires, your mortgage broker can help you re-fix that portion, consolidate it into your variable loan, or negotiate a lower rate.
Are there any additional fees associated with split loans?
Most major lenders include split sub-accounts under their single annual or monthly home loan package fee. However, some basic home loan products charge an account setup fee for secondary splits, so it is important to review lender terms with the help of your broker.
Can I split my home loan into more than two portions?
Yes. Many Australian lenders allow you to split a mortgage into three or more sub-accounts. For example, combining one variable account with two fixed accounts of different term lengths (e.g., a 2-year fixed split and a 5-year fixed split).
We will also help you compare different loan products, ensuring you get the most favourable comparison rate and avoiding potential break fees.
