Split Loans
What is a split loan mortgage
A split mortgage is a loan feature that allows the loan to be split into multiple loan accounts that attract different interest rates
A popular example is to split a variable interest rate and a fixed term together in one loan
What are the benefits
- Makes budgeting easier with the fixed term component
- It allows you to minimise the risk of increased repayments by fixing a portion of the loan
- The fixed rate gives a competitive interest rate while retaining the flexibility on the variable side
- Unlimited repayments on the variable portion of the loan
- Attach an offset account to the variable portion of the loan
Advantages of a split loan
- Certainty of repayments from the fixed term and flexibility that comes with a variable loan
- Unlimited repayments on the variable portion of the loan
- Generally no restrictions on how the loan is split, whether it’s 50/50, 70/30 or 60/40
Disadvantages of a split loan
- Missing out on interest rate drops
- Paying more if interest rate rises
- Fees may be attached to both sides of the loan split
- Break costs (exit fees) on the fixed term portion if the contract is broken
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