What is a split home loan?

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A guide to split rate home loans

Updated March 07, 2024
Written by James Hurwood
Reviewed by Stephen Zeller

What is a split home loan?

Considering taking out a split rate home loan? Selling Houses Australia host Andrew Winter has tips and advice for you.
Andrew Winter
Home Loans

Why choose a split home loan?

  • If you’re torn between fixed rate and variable rate home loans, a split home loan could be a ‘best of both worlds’ type of home loan.
  • A fixed rate component gives you a measure of protection against rate increases, whereas a variable rate component lets you benefit from rate cuts.
  • A split home loan could be a valuable option in uncertain interest rate environments.

Comparing split home loans

When weighing up different split rate home loan products, you’ll want to keep a few different factors in mind:

  • Both comparison rates – Two different interest rates means two different comparison rates, so you’ll need to make sure that both of the rates on any given split home loan product are competitive.
  • Permitted split proportions – Depending on the lender, a split loan product may impose minimum or maximum proportion amounts. Be sure that any product you’re considering allows for your desired split proportions.
  • Features and fees – A great-value split home loan should come with competitive fees and the features you need.

Expert tips for split home loans

Split rate home loans can be a valuable home loan solution, but it’s important to understand both their potential pitfalls and the ways in which you could maximise the value you get from one. Our General Manager of Money, Stephen Zeller, has some tips for anyone considering a split rate home loan.

Stephen Zeller
General Manager – Money

You can split your home loan for investment purposes

Not all borrowers know that you can split a home loan for dual purposes, which can come in handy for property investors with an existing investment home loan looking to borrow money against their rental property. However, keep in mind that if the split is for investment purposes, investment rates will typically apply.

Consider the impact of offset accounts

Some lenders may restrict how many offset accounts a customer can set up, regardless of how many loan splits they have. If you’re looking to set up multiple offset accounts across multiple loan splits, be sure to research any possible restrictions before applying for the finance.

Watch out for the fees

Depending on your lender, two accounts could potentially mean two sets of monthly fees. If the lender in question charges a monthly account-keeping fee on its home loan accounts, check to see if you’ll be charged twice under a split home loan arrangement.

Split home loans explained

What is a split home loan?

What features can I get on a split home loan?

Can I get a split investment home loan?

What are the benefits of splitting a home loan?

Pro: The fixed portion can afford you a measure of budgeting security

Pro: If interest rates drop, you may be charged less interest on your split loan’s variable portion

Pro: You can generally make penalty-free extra repayments on your variable portion

Pro: You can choose the proportions of your home loan split

What are the downsides of splitting a home loan?

Con: If rates go down, you won’t pay any less on your fixed component

Con: You may pay a break fee if you refinance or pay off your home loan early

Con: You may pay more in fees on a split home loan

Important to know

Can a split home loan help me pay off my mortgage faster?

Can I switch from a split home loan to a standalone fixed or variable rate home loan?

Should I have a bigger fixed rate or variable rate component?

Meet our home loans expert, Stephen Zeller

Stephen Zeller
General Manager – Money

Stephen has more than 30 years of experience in the financial services industry and holds a Certificate IV in Finance and Mortgage Broking. He’s also a member of both the Australian and New Zealand Institute of Insurance and Finance (ANZIIF) and the Mortgage and Finance Association of Australia (MFAA).

Stephen leads our team of Home Loan Specialists, and reviews and contributes to Compare the Market’s banking-relating content to ensure it’s as helpful and empowering as possible for our readers.