Split Home Loans: Fixed + Variable Rate Loans

This type of loan setup is a way of hedging your bets. If you are unsure as to whether interest rates are going up or down, you can choose a Split Rate Loan.

With this type of loan, you nominate how much of your home loan you would like to be secured with a fixed mortgage interest rate and how much of your home loan (the remaining amount) you would like to put on a variable rate.

A Split Home Loan is a cautious way of borrowing.

Advantages

Having part of your loan at a fixed interest rate protects you against interest rate rises.
Leaving part of your loan on variable interest rate leaves you less vulnerable if rates reduce.
Additional payments are allowed on the variable portion of the loan.

Disadvantages

You may not benefit greatly from any interest rate fluctuations.
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.
You may be penalised if you pay off your loan before the due date on the fixed portion.

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