With a split rate loan, you get the best of both worlds. You can choose to make part of your home loan a variable rate and part a fixed rate and you can decide how much you allocate to each. When deciding the split, the key consideration generally comes down to the amount of risk you want to take on interest rates going up or down. You also need to consider your budget.
Advantages:
- Flexibility – you can choose which portion you would like to fix and which portion you would like to be on variable terms
- Competitive interest rates over a variety of fixed and variable loan types
- The variable rate portion gives you repayment flexibility and in most cases features like an offset account and redraw
- The fixed rate portion offers you interest rate and repayment security and peace of mind
- You still benefit from interest rate drops on the variable portion
- Disadvantages:
- There are usually exit fees and break costs if you wish to break the fixed loan during the fixed rate period
- By splitting your loan, you limit the benefit in reduced repayments in the event of interest rate reductions
Download our ‘Which Home Loan’ brochure (pdf) for more tips and general information.
