Split Rate Home Loans

Split Rate Home Loans refer to the way you structure the interest and repayments on your loan. The ability to split the home loan can be advantageous depending on your circumstances.

Many Home Buyers are suited to the common Variable or Fixed Home Loans, however Banks and Lenders offer more flexibility to cater to Borrowers.

Split Rate Loans allow you to have one portion of your loan charged at a Variable Rate and the other portion charged at a Fixed Rate. Having the best of both worlds will guarantee more stability on the Fixed Rate portion, and more flexibility on your Variable Rate portion.

This Home Loan feature is beneficial as you can portion it in different ratios and don’t necessarily need to have a 50:50 set up - for example you could portion it 70% Variable and 30% Fixed.

Split Rate Home Loans become beneficial when you’re allowed the flexibility to apply a Fixed Rate portion of your loan in the event of Interest Rate increases.

For example, if you have a Home Loan with a Split Rate at 60% Variable and 40% Fixed and the Interest happens to increase, it will only increase the repayments on the 60% Variable portion, whilst the 40% Fixed portion repayments remain the same.

Another benefit of having Split Rates, is to cater to making Extra Repayments if this is something you would like to do. You can only make extra repayments on a Variable Rate Home Loan, allowing you to pay off your loan faster.

Split Rates also allow you to have a Fixed portion of the loan whilst still being able to access other Home Loan features such as Offset accounts and Redraw Facilities as many Banks and Lenders restrict access unless your Home Loan is on a Variable Rate.

Split Rates also come in handy in the event of an Interest Rate decrease, as you would portion a percentage of your loan on a Variable Rate, allowing you to take advantage of lower repayments whilst have the security of the Fixed portion.

There are many advantages for Split Rate Loans above, however there are always pros and cons to every situation and that’s why it’s important to apply these features when it’s beneficial your specific situation.

Of course, having a Variable Rate and Fixed Rate split will indicate that your repayments could vary month to month. This is in reference to the Variable portion as the Interest Rate fluctuates in the property market.

There is also the possibility of Lenders charging you fees to access certain Home Loan features.

Keep in mind also, if the Interest Rates decrease, you will only benefit from the Variable portion, leaving the Fixed portion at the agreed Rate for the designated 1 to 5 years.

If you choose to refinance or repay the loan early, you could be charged fees from the Bank on the Fixed Rate portion as a Break Cost.

Keeping in mind your financial situation and future goals is key to making this decision. There are many advantages to Split Rate Home Loans and it could work perfectly in your circumstance, however all Home Buyers vary from each other.

Look to the Pros and Cons and see what works best for you.