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.

Book Call Now

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

Marlon Baena
July 22, 2024
Karis dedication to assisting with our home loan, even while I was on holidays, truly exemplifies a commitment to excellent service. It's the small things that often make a big difference, and it seems Karis attention to detail and clear communication were key to our smooth home purchase. I highly recommend using UNO and Karis for your home loan needs.
Read more
Olivia Gill
July 18, 2024
We recently used UNO Home Loans to assist us with securing our new mortgage in AU (had moved here from NZ). We had Michael Parsons as our mortgage broker and he was extremely responsive and helpful the whole way through the process. Was a great experience and definitely recommend :)
Read more
Yash Karma
July 18, 2024
Andrew Wyers and team have been amazing. Andrew is very knowledgeable, offers practical advice and he has been pivotal in helping me secure a mortgage at a very competitive interest rate. He was highly responsive to my queries and,being a new immigrant to Perth, he was very patient with my many many questions. An added benefit for me was his knowledge of how superannuation here works. A hec of a great guy to work with, reliable and he goes above and beyond. I would recommend highly recommended him, especially for new immigrants. In fact, I will be using him again very soon!
Read more
Rosie Deiath
July 2, 2024
Karis from UNO was so supportive throughout the entire process of buying our first home. She was contactable at any time, and answered all our silly questions for us. We couldn't recommend Karis and her team enough, as it always felt like she was in our corner with our best interests at heart.
Read more
Jack Mikkelsen
July 2, 2024
We dealt with Karis Churchill as the mortgage broker for our first home. Karis was so supportive and knowledgeable through the whole process! A+ mortgage broker. Definitely utilise her expertise if you’re buying a house!
Read more
Kapil Baldota
June 25, 2024
Eren Tan is absolutely one of the best mortgage brokers in Melbourne! Keeping us well informed throughout the process. Eren gave us a helpful hand in managing to get our loan over the line in a quick and efficient way which is what we wanted and he delivered on that. Thank you Eren Tan!
Read more
June 21, 2024
I only have praise from my Uno experience! I was a broker sceptic, having done all of the hard work myself for my first two property purchases and sale. I'm now a proud broker advocate having used UNO (Karis Churchill) for two refinances and purchase. The value add Karis brought cannot be underrated! Not only has Karis got me the best rate, with a bonus cash back (nearly unheard of in this climate), she has done it with the least back-a-forth and with the least administrative burden on me (the thing that can deters people from refinancing to begin with). Karis is always on top of everything. Karis knows her stuff. She is the most responsive of any professional service provider I've ever used (my banker never text with an update at 7pm on a Sunday) without being overbearing. You know she's got your back and in my experience the value speaks for itself. Thank you to the whole UNO team, thank you especially to Karis.
Read more
Leanda Cawdry
June 8, 2024
Very pleased with the outcome of this process, Michael Parsons and his team at UNO were helpful, communicative, and took all the stress out of the process of finding me a refinance deal that met my needs. Would definitely recommend Michael and UNO, and I already have!
Read more
Glen Matthews
May 29, 2024
Regarding UNO Home Loan services. I had great experience with uno home loans, Michael parsons was my broker for UNO Home Loans we had excellent communication throughout the whole home loan application. If I had any questions on home loan application which were many were answered in great detail. He had the time to assist me in filling out endless application forms at anytime through the day or night which made the application process stress free. So I would strongly recommend Michael parsons from UNO Home Loans to try his services you will not be disappointed. Thanks to Michael parsons I have the lowest home loan interest rate I could ever hope for which I particularly ask for. It’s was a pleasure working with him. And will be using his services in the near future.
Read more
Gillian Anderson
May 28, 2024
Thank you to Michael and UNO for their help in securing our home loan. I like the way they break everything down in simple terms to ensure that you can make the right decision. Michael was polite and very patient to help us get things across the line. We are now sitting in our first home away from rental circus. Can't recommend them enough. Thanks Michael and thanks UNO
Read more
Andy Song
May 17, 2024
Amy has been absolutely wonderful as a broker. I would not hesitate one bit in recommending her services.
Read more
Troy H
May 13, 2024
Scott Wilkinson did a great job as my broker. He was very patient and always happy to answer my numerous questions throughout the considerable period of time that it took to secure a suitable property. Would certainly recommend Scott and the team at UNO for anyone seeking a broker.
Read more