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Buying a home

What is a 'split' home loan, exactly?

30 October 2019

Anyone with a passing familiarity with home loans - or loans in general, for that matter - will be aware of terms like ‘fixed interest rate’ and ‘variable interest rate’. Less famous (or infamous, depending on your point of view) are terms like ‘split home loan’, ‘split facility’ and ‘split mortgage’.

All of them mean the same thing. They describe a home loan arrangement where you can have both fixed and variable interest rates on your loan at the same time. Essentially, you split your home loan into portions and allocate an interest rate model to each one.

Example

You may wish to only have a fixed interest rate on 20% of your loan, while you pay the variable rate on the remaining 80%. On a $500,000 loan this would mean a fixed interest rate would be charged on $100,000 and the remaining $400,000 would have a variable interest rate.

How you divide the split facility is entirely up to you.

Why split a home loan?

The 'split loan' option is typically viewed as a comfortable compromise between the pros and cons of fixed and variable interest rate loans. A split mortgage allows you to reap the benefits of both the security of fixed rate loan and the flexibility of a variable interest rate loan.

They’re particularly effective when the market is proving harder than usual to predict. If you don’t know if interest rates are going to go up or down, a split home loan allows you to hedge your bets a little. If they go up, you’re tied into the lower current interest rate. If they go down, you’re in a position to take advantage of those lower rates.

No home loan is risk-proof and every one is different – but a split home loan might be a good way for you to avoid some of the pitfalls of the house-buying market.

Find the right home loan option for you

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Information is intended to be of a general nature only and any advice has been prepared without taking into account any person's particular objectives, financial situation or needs. You should make your own enquiries, consider whether advice is appropriate for you and read the relevant Product Disclosure Statement or Product Information Document before making any decisions about whether to acquire a product

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