WHAT IS A ‘SPLIT LOAN’?
Split loans are becoming more and more common, this loan option provides security and flexibility all in one. It is a great option for those that can’t decide whether to choose a variable or fixed rate loan, a split loan offers the best of both worlds. A split loan allows you to distribute a portion of your loan amount to a variable interest rate, and the rest of the loan to a fixed rate.
A variable interest rate loan fluctuates according to the current cash rate, as set by the Reserve Bank, however, there is also nothing stopping the lenders from moving their rates up or down at their own discretion or due to regulatory and funding pressures.
The fixed interest rate loan has a fixed interest rate for an agreed term and the repayment term is also fixed which generally varies from 1 to 5 years.
WHAT ARE THE BENEFITS OF A SPLIT LOAN?
For most the decision between a fixed rate or a variable rate home loan can be a hard one to pin, choosing a split loan may be the most suitable option for you. The only real downside of choosing a split loan is that you will not be able fully repay the fixed portion, without significant break costs.
Aside from the small downside, there are plenty of benefits when having a split loan.
The most common benefits can include:
Rising interest rates – having a fixed rate split will protect you from any potential rise in interest rates.
Certainty - having a fixed rate split will give you certainty that the monthly repayment will remain the same throughout the term of the fixed rate.
Offset account – you are able to enjoy the interest saving benefits of an offset account which is normally not an option with a 100% fixed rate loan.
Extra repayment – having the variable portion gives you the ability to make extra repayments without being penalised.
Because of these benefits, a split loan truly is the best of both worlds.
Explore your options today by calling Certified Lending on 0433 590 621 and let us guide you through the process.
"Disclaimer: Your full financial situation would need to be reviewed prior to acceptance of any offer or product"