This type of loan setup is a way of hedging your bets. If you are unsure as to whether interest rates are going up or down, you can choose a Split Rate Loan.

With this type of loan, you nominate how much of your home loan you would like to be secured with a fixed mortgage interest rate and how much of your home loan (the remaining amount) you would like to put on a variable rate.

A Split Home Loan is a cautious way of borrowing.

Advantages

• Having part of your loan at a fixed interest rate protects you against interest rate rises.
• Leaving part of your loan on variable interest rate leaves you less vulnerable if rates reduce.
• Additional payments are allowed on the variable portion of the loan.

Disadvantages

• You may not benefit greatly from any interest rate fluctuations.
• You may be charged set-up fees, account fees and discharge fees on both the fixed portion and the variable portion.
• You may be penalised for making higher repayments on the fixed portion.
• You may be penalised if you pay off your loan before the due date on the fixed portion