SPLIT RATE LOANS

Split rate loans are divided into separate loans, whereby, one part is variable and one part fixed. The borrower decides what portion is variable and fixed. Split rate loans take advantage of the flexibility of a variable rate loan as is moves up and down with the prevailing RBA interest rate, while also enjoying the certainty that a fixed rate loan provides.

Upside

  • Your mortgage repayments will be less volatile because of the fixed rate component of your Split Loan when interest rates change. Bear in mind the fixed rate portion of your loan will not benefit when variable rates fall.
  • When interest rates fall, the repayments on you variable portion of your loan will too.
  • The variable portion of your loan can be repaid ahead of schedule.

Downside

  • When interest rates rise, the repayments on the variable portion of your loan will too.
  • You may be penalised if you decide to restructure or exit the fixed portion of you loan before the agreed term.
  • Limited additional repayments are allowed on the fixed portion of your loan.
  • Financial penalties will be imposed if you decide to repay the fixed loan ahead of the agreed fixed term. (ie : paying off a 3 year fixed loan in 18 months)