A split loan is exactly what it sounds like, it’s one mortgage, divided into two (or more) separate loan accounts. Instead of having your entire home loan on one rate type, you can split it between fixed and variable options.
In the right environment, it can be a very smart move.
So… What’s the Point of Splitting?
The most common reason people split their loan is to get the benefits of both:
✔ The security of a fixed rate in a volatile environment
✔ The flexibility of a variable rate
It’s about getting the best of both worlds – security – and the features and benefits that come with a variable rate product, that isn’t always on offer with a fixed rate product.
The Fixed Portion
When you fix part of your loan:
- Your interest rate is locked in for a set period
- Your repayments are predictable
- You’re protected if rates rise
This can be incredibly helpful in uncertain rate environments.
But fixed loans usually limit:
- Extra repayments
- Redraw flexibility
- Offset account availability
- Ability to refinance without break costs
Which is why fixing everything isn’t always ideal.
The Variable Portion
When part of your loan stays variable:
- You can make unlimited extra repayments
- You can access redraw
- You can attach an offset account
- You retain refinancing flexibility
This is where cash flow management and strategy come into play.
Why a Split Loan Can Make Sense
A split structure can:
✔ Reduce risk exposure
✔ Protect part of your loan from rate rises
✔ Keep part flexible for lifestyle or investment plans
✔ Allow you to hedge your position rather than “betting” one way
For example:
You might fix 60% for security
And keep 40% variable for flexibility
There’s no universal formula, it depends entirely on your situation – but it is important to note that if you do choose a split loan and want an offset feature, you can only offset up to a maximum amount of your variable component. You are not always able to offset the full loan amount. Reach out to understand more about this.
But Here’s the Important Part
A split loan isn’t automatically “better’, it needs to align with:
- Your cash flow
- Your risk tolerance
- Your future plans
- Whether you plan to refinance
- Whether this is owner-occupied or investment
- Your tax position (if applicable)
Working with an expert in split loans can help you decide as to whether it is right for you – and if it is, how to best structure it.
The Biggest Mistake People Make
They copy someone else. Like anything else to do with home loans, what works for your colleague, your sibling, or your neighbour is based on their numbers, not yours.
Interest rates, debt levels, savings buffers, income stability, investment strategy.. they’re all different, and they all require different lender policies to suit. In turn, home loans should all be tailored to personal goals and financial circumstances – which means that yours is unlikely to be the same as Uncle Joe’s.
A split loan is about strategy, not trend-following. In certain rate environments, it can provide confidence and flexibility at the same time – but in others, it may not be necessary.
At Australian Property Home Loans, we don’t just look at the rate, we look at the structure behind it.
The right structure can save you far more than a headline rate ever will, so if you’re wondering whether a split loan makes sense for you, let’s run the numbers properly.
