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In today's evolving mortgage landscape, more and more Aussies are discovering the benefits of split loans. This approach blends the security of a fixed rate with the flexibility of a variable rate, potentially giving you the best of both worlds.
What is a Split Loan?
Think of a split loan like having two (or more) home loans in one. A simple split loan has one part of your mortgage locked in at a fixed interest rate, and the other subject to a variable rate. This lets you take advantage of the positives of both types of loans.
Flexibility of IMB Split Loans
Split loan flexibility goes even further than rate types and can include loan terms and repayment options. You can:
- Split between fixed and variable interest rates
- Split into more than two loans
- Have one loan principal and interest (P&I) loan and the other interest only
- choose to apply different loan terms – number of years – to the different parts of the loans.
For example, if you are refinancing your $400,000 loan and using your equity to borrow more for a renovation or a new car, you may choose a loan split into the following loans:
- $200,000 loan on a 30-year loan term, with a variable P&I interest rate for (to potentially access an offset account and add unlimited extra repayments)
- $200,000 on a 30-year loan term, on a fixed rate with interest only repayments for 3 years
- $100,000 loan on a 10-year loan term, on a fixed P&I rate for 5 years (perhaps for a renovation or car, or investment.
This example is a simple illustration of the possibilities of split loans available to IMB members, not a recommendation. Speak with an IMB specialist to discuss the split loan options that work best for your needs.
Benefits of a Split Loan
- Stay Flexible: the variable part of your loan gives you wiggle room to make extra repayments or access features like an offset account.
- Enjoy Stability: The fixed portion of the loan acts as a safety net, protecting you from potential interest rate hikes.
- Make It Your Own: You can customise the split to suit your risk tolerance and financial goals.
Important Considerations:
- Two Loans (or more) to Manage: Juggling two loans might be a bit more complex than having just one.
- Potential Fees: Some lenders might charge extra fees for split loans. IMB charges only $100 per split (and yes, you can have more than one).
- Limited Rate Benefits: You won't get the full benefit of rate drops on the fixed portion, and you won't be fully protected from rate rises on the variable portion.
Split loans offer a middle ground between the predictability of fixed rates and the flexibility of variable rates. If you want a mortgage that's tailored to your needs and offers a mix of stability and flexibility, a split loan might be the answer. Just be sure to consider your financial situation before making a decision.
Speak to an IMB specialist now.
FAQs
How to apply for split home loan
You can request a split loan at the time of application, or any time after settlement. A switching fee may apply if you request to change your loan (link to Change your IMB home loan)
How does a split home loan work
A split home loan is a clever approach that combines the benefits of both fixed and variable interest rates. Essentially, it allows you to divide your home loan into two parts: one with a fixed rate and the other with a variable rate. This way, you can enjoy the stability of a fixed rate while also taking advantage of the flexibility offered by a variable rate
Can I control how much i split between fixed and variable on a split home loan
Yes, you can choose the amount applied to each split loan. The minimum amount is $10,000.
What are the benefits of a split my home loan
Split gives you the flexibility to customise your loan to suit your needs. You can select a combination of loans to suit your risk tolerance and financial goals.
What is a split home loan
A split loan is when you choose to have multiple loan accounts under the one loan. You can choose fixed, variable or a combination of both. You can also choose to apply different repayment options to each loan. And you can have as many split loans as you like (minimum $10,000 per loan account).
Are there any product restrictions when applying for a split home loan
A minimum loan amount of $10,000 applies.
Can i have different loan terms on my split loan?
Yes, you can. The minimum loan term is 10 years.
