Loan Types

Split Loans

If you are unsure about whether it is better to have a fixed rate home loan or a standard variable rate home loan – you could consider a split loan. This gives you the option to take a part fixed rate and a part variable rate loan.

With this type of loan, you nominate how much of the loan you would like to fix and how much you would like to put on a variable rate.

The reason for this is simple: If interest rates increase, then the portion of the loan, which is fixed, will give you peace of mind, that portion will not go up. If interest rates go down, then you will feel at ease knowing that the variable portion of your loan will also go down. The Split Loan is a cautious way of borrowing.

Benefits

• You can fix part of your interest rate to give you peace of mind against future interest rate rises
• Have part of your home loan on a standard variable rate so you’ll receive the benefits of a reducing interest rate
• Additional payments are allowed on the standard variable rate portion so you can reduce your loan term

Pitfalls

• You we only benefit from interest rate reductions on the Standard variable rate portion
• You may be charged set-up fees, account fees and discharge fees on both the fixed portion and the variable portion
• You may be penalised for making higher repayments on the fixed portion or paying out your loan prior to the end of the fixed rate period