Can’t decide between fixing your home loan or going with a variable rate? Feels like you’re being asked to choose between cake and ice-cream and what you really want is both together?! There is another option that lets you do just that.
If you’re keen to fix part of your home loan to have a level of certainty around, but still want some of the appealing features of a variable home loan, a split loan lets you have the home loan equivalent of having your cake with ice-cream!
Quick recap on what a fixed loan is, what a variable rate is, and what a split loan is.
A fixed loan
With a fixed loan, the interest rate and therefore the repayment amount, won’t change until the fixed term ends. A fixed home loan protects you from interest rate rises (although the flip side of that is of course you wouldn’t benefit from a drop in interest rates). Fixed loans typically come with fewer features than variable loans, and there are normally restrictions around making extra repayments.
A variable loan
With a variable rate loan, the interest rate can change at any time; it could go either up or down. Variable home loans tend to offer more flexibility such as allowing you to make extra repayments, which les you pay off your loan quicker.
A split loan
A split loan offers a combination of fixed and variable. It means that your repayments on the fixed loan portion won’t change, but also lets you tap into some of the benefits of variable loans (such as a redraw or offset account).
If you do want a split loan, the percentage of your loan that you decide to make variable and fixed is up to you.