What is a split rate loan?
A split rate loan lets you divide your home loan between fixed and variable rate components.
This can be a way to enjoy the best of both worlds – the certainty of a fixed rate and the flexibility and features of a variable rate loan.
What are the pros and cons of a split rate loan?
Pros:
- Provides some peace of mind for borrowers concerned about rate rises
- Provides more certainty in budgeting than full variable loans
- Can make additional payments on variable portion of the loan
Cons:
- Allows limited additional payments only
- Repayments will rise with rate rises on the variable part of the loan
- If interest rates fall, repayments on the fixed rate portion of the loan will remain at the higher fixed amount
