Split Loan
A home loan divided into two or more portions with different rate types or terms, most commonly part fixed and part variable.
In detail
A split loan lets a borrower hedge rate risk by fixing part of the loan and keeping the rest variable. The fixed portion provides repayment certainty while the variable portion retains features like offset and unlimited extra repayments. Splits are set at loan origination or can be arranged as an existing variable loan is part fixed.
The split ratio depends on client appetite for certainty. A 50 50 split is common. Some brokers fix a larger portion for borrowers stretched on serviceability and keep a smaller variable portion to retain offset functionality for savings.
Why it matters for brokers
Splits let brokers offer a middle ground between fully fixed and fully variable structures. Explaining the split options clearly helps clients make informed decisions and reduces the chance of rate regret later.
Example in practice
A client with a $700,000 loan splits it into $400,000 fixed at 5.99 per cent for three years and $300,000 variable at 6.14 per cent with a linked offset. The fixed portion protects over half the loan from rate rises while the variable portion keeps the offset working on the client salary and savings.
Related terms
Fixed Rate Loan
A home loan where the interest rate is locked in for a set period, typically between one and five years.
Variable Rate Loan
A home loan where the interest rate moves up or down over time in response to market conditions and lender pricing decisions.
Offset Account
A transaction account linked to a home loan where the balance reduces the loan principal used to calculate daily interest.
Principal and Interest (P&I)
A loan repayment structure where each instalment reduces both the loan balance and the accrued interest.
Related guides
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