What is a split home loan Australia?

Split home loans combine fixed and variable portions of a loan to offer you the best of both worlds.

With RBA raising interest rates to a decade-high of 4.10%, taking time to consider the structure and type of your home loan could save you thousands of dollars.

A split loan is when you divide a mortgage into separate parts, giving you greater flexibility with a combination of fixed and variable rate components.

In this article, we uncover how split loans work and the benefits of a split home loan.

  • A split loan divides your loan into multiple parts with a combination of fixed and variable rates.
  • Variable rates change over time in line with RBA interest rates while fixed rates are locked for a certain period.
  • The benefits of splitting a mortgage include flexibility and tolerance to interest rate changes.
  • There is no set number, but common split ratios vary, but can include 50:50, 60:40 or 80:20.
  • It is possible to refinance a split home loan - A UNO Broker can help you do this.

What is a split home loan? How does a split loan work?

A split loan or 'combo loan' is dividing your loan into parts. You might put one portion of your loan on a fixed variable rate and the rest at a variable rate.

It is important to remember that variable rates are subject to interest rate movement while fixed rates are locked for a set period.

With a split loan, you can get a combination of fixed and variable rates.

Navigating fixed and variable rates

'Should I fix my home loan rate' is a common question as interest rates fluctuate.

There are many pros and cons with fixed and variable home loans which can make deciding tricky. A split home loan gives you the best of both options by locking a portion of your home loan and leaving the other at a variable rate.

A split loan could help offer flexibility, save time, and minimise the risks of drastic repayment changes.

Many lenders offer fixed rate options, such as fixing your interest rate for 1-5 years or 1-3 years. This can be an attractive option for homeowners if interest rates are increasing.

But the opposite might be true if interest rates are set to decrease. In this case, fixed interest rates don't give you the flexibility that variable rates do.

Variable rates often come with many additional features. They can give you the ability to make extra repayments or access an offset account but some fixed rate also have partial or complete offset.

Split loans can help manage risk

Diversification is often key in finance. Splitting your loan could help you navigate the risks of interest rate changes.

The cash rate in October 2023 is 4.10%, up from 2.6% in October 2022. This represents an extra $400 a month in repayments for an average 30-year mortgage - or $200 if half your loan is split on a fixed rate. Splitting a home loan could help curve the impact of future interest rate changes, potentially saving you thousands in interest. The difference illustrated above, for example, equates to about $150,000 across the life of a loan*. They could also offer stability by making it easier to budget for the fixed component of the loan.

What are the disadvantages of splitting a home loan?

There are advantages to a split home loan, but there are also drawbacks including:

  1. Fluctuating repayments - If a portion of your home loan is variable, your monthly repayments might change if interest rates vary. This could make budgeting harder.
  2. Interest rate changes - If interest rates increase, your variable loan portion will increase. Conversely, an interest rate drop might mean you don't fully benefit if your fixed rate portion remains steady.
  3. Fees - Lenders charge fees and having two loan products could result in different fees. Some loans also have break fees if you want to leave a loan early. A UNO Broker can help you navigate fees.

What is a good split loan ratio?

There is no typical rate, but common split loan ratios include 50:50, 60:40 or 80:20 two-ways with a fixed and variable rate.

In most cases, you can choose to split your loan however you like, provided you meet your lender's minimum loan amount. Some lenders won't allow more than two splits, but a UNO Broker can help find the best option for you.

The 'ideal' split comes down to your financial needs and personal circumstances. You should discuss your financial situation, plans, and risk level with your broker to determine which rate is right for you.

There are many potential splits. For example, you could opt for a 10% fixed rate with a 90% variable rate; or 50% fixed and 50% variable. If you are looking to borrow $500,000 in total, splitting 50% fixed and 50% variable would mean you are borrowing $250,000 on the fixed rate product and $250,000 on the variable rate product.

Can you refinance a split loan?

Yes, you can refinance a split loan. The process may involve a bit more paperwork if there are two loans, but working with a mortgage broker can make this process easier.

A UNO Broker can help you refinance your split loan while giving guidance on navigating different split structures and loan options.

Making extra repayments on a split loan

Fixed interest rate products often have restrictions on the amount of extra repayments you can make per year or during the fixed rate period without incurring a penalty (often known as a ‘break cost’ or ‘prepayment fee’).

The amount allowable will vary from lender to lender but, generally, a fixed rate product will allow you to make up to $10,000 per year without penalty. That means fixing your whole loan may restrict you in only making up to $192.30 each week in extra repayments.

If you intend to add an additional $1500 to your minimum monthly repayments (or $18,000 in extra repayments per year), then fixing 100% of your loan will not give you that flexibility.

Split rate home loans: the bottom line

You get the best of both with a split rate home loan. But nothing is perfect.

Splitting your loan into fixed and variable portions is a great way to provide flexibility. It can lower the risk of exposure to interest rate changes and repayment hikes. The variable component can enable to access mortgage features not typically available on a solely fixed rate.

Equally, split loans can also be beneficial in the event of fall, you are locked into your rate and simply cannot capitalise on the option to make less in repayments. However, if part of your loan is variable, then you can still benefit from the decrease in interest rate on the variable portion, paying less in repayments and interest. Wondering whether to go fixed or variable? A combination of the two could be the answer you're looking for. Talk to a UNO Broker today to discuss your options.

Want help navigating a split loan?

  • What the split should be
  • How to use IO effectively
  • Strategies regarding splits for debt consolidation
Book Call Now

UNO home loans

November 29, 2023

Need help with your home loan?

UNO Brokers are available night and day for a quick review or your situation and bring expertise that will support better decision making that will save you time and money. Book in a quick call when it suits your busy schedule

Get Started

Related Articles


What our customers are saying

Sally Mackenzie
February 19, 2024
We chose Uno Home Loans from their impressive web site knowing we were going to find it hard, on many fronts, to qualify for a home loan. We were incredibly fortunate to be assigned Mike Parsons as right from the get-go, despite the complexities, he hit the ground running for us. He was incredibly knowledgeable, with years of experience but what was immediately apparent and impressive was that he was totally invested in getting us over the line, doing absolutely everything possible, including working around the clock. Despite it being a relatively small loan in the order of things, Mike never missed a beat, getting docs ready, following up and answering every request from the proposed funder immediately. He kept us informed on progress the minute anything happened, and again if anything needed to be done, he was right on it. In short, we highly recommend Uno, and Mike, knowing what a remarkable job he did, over many weeks, to get us our loan. He got us a great deal, with far better rates than we expected, so we couldn't be happier. In fact, without doubt, you'd be hard pressed to find a more personable, sharp, hard working, dedicated professional who clearly prides himself on getting his customers standout results.
Read more
February 13, 2024
Scott and his team were just A-mazing. We felt supported through the whole process with the greatest quality and care. Every question answered right in time, or even before we asked. The process was smooth and we got the best outcomes we could have wished for.
Read more
Angela Biddle
February 6, 2024
Our mortgage recently came up for renewal, and with interest rates skyrocketing we were looking for ways to minimise the impact. Michael and his team were proactive and attentive. Michael spent time with us to understand our circumstances. He found mortgage options that worked with our current financial situation and longer investment plans. He presented clear options, providing guidance where needed. He and his team were helpful and responsive - streamlining the process and keeping us updated through the negotiations. In the end, Uno did the heavy lifting and secured a significantly better rate than our current bank offered, all with friendly, personal service. We would highly recommend UNO Home Loans.
Read more
Fotis Bikas
January 15, 2024
I cannot help but congratulate Scott Wilkinson of UNO Home Loans for being an absolute credit to both his company and the entire loans industry. Scott is a truly rare gem of a broker in that he will not only go the extra mile to achieve for each customer the very best deal, but his knowledge of all and sundry within the industry is unsurpassed (you will see what I mean if you speak to him). Additionally, Scott has a clear passion for imparting his wealth of information with each customer, whereas the conversation with most other brokers would simply be over if they could not get you the best deal. For me, Scott Wilkinson of UNO Home Loans stands head and shoulders above the competition and I feel privileged to benefit both from his expertise and professionalism whenever it is time for a refinance or new loan.
Read more
Tomoharu Matsui
January 11, 2024
Michael Parsons helped me a lot when it's difficult to establish my capabilities in loan.
Read more
Gillian Kearon
January 9, 2024
I highly recommend Mike Parsons as a mortgage broker. I couldn't fault the service provided by UNO. Thanks Mike!
Read more
Taner T
December 20, 2023
Thank you Eren Tan for the amazing service and support. Our Loan was a little tricky and complex for other lenders but Eren managed to get it over the line in record time. His professionalism and dedication to our needs was exceptional. If you need a Loan no matter how complex your situation, make sure you contact Eren at UNO Home Loans.
Read more
Karaipu Brown
December 20, 2023
Buying & selling a house at the same time is very stressful but Scott Wilkinson from UNO home loans made sure we knew what was happening & took most of the stress away. He always kept us up to date and if we had a concern or wanted clarification on something we were able to call him, if he didn’t know the answer straight away he will find out and contact us back.. now we are enjoying our new house and turning it into a home :)
Read more
Chris Anderson
December 18, 2023
Just completed my first loan with UNO which was so much easier than with other other brokers I have used in the past. Our broker MIKE PARSONS always had time for me and broke things down for me in the simplest of terms and was very patient with my silly questions and my constant changing of plans. I wish I had used them in the past as I wouldn't be in the situation I'm in now. Can't recommend them highly enough. Thanks UNO and Thanks MIKE 😊
Read more
Stephen Broomfield
December 11, 2023
To be able to recommend Scott Wilkinson for your mortgage broker was a privilege. We had deals fall through but Scott supported, guided and stuck with us, proper partnership. The whole team at UNO helped us and supported us right through to after settlement. Made sure everything was correct and how we are progressing. Communication was amazing and straightforward and easy to understand. Transparent. We can not Recommend Scott and the team as Uno high enough. Use UNO with confidence.
Read more
Tarek Hussain
December 6, 2023
Can't thank Amy enough for her hard work, dedication and determination on getting multiple loans completed for me. I wouldn't hesitate in recommending Amy and the Uno team to any of my associates. Will definitely be back in the near future!
Read more
November 3, 2023
If you’re looking for a trustworthy, thorough, reliable & knowledgeable Mortgage Broker then you must call Anita Callaghan! I can’t even imagine how stressful this process would’ve been without her. Anita went above and beyond to make sure she answered every question, responded to every text (even on weekends/after hours), and followed up on every detail to ensure we had all the info we needed. Anita is a true people person who is warm, empathetic, kind and supportive. You can tell she loves helping people and loves what she does, which is probably why she’s so good at it! Can’t thank you enough Anita, or recommend you more highly! You’re the best!
Read more