How Do Split Loans Work?
What Are Split Loans?
What Is the Difference Between Fixed-Rate and Variable-Rate?
A fixed-rate loan product offers an interest rate that is “fixed” for a set period. The fixed-rate period is usually between one to five years.
The main advantage of a fixed-rate loan is that it gives you the certainty of what your repayments will cost for a while because your interest rate is guaranteed not to go up or down during the fixed term.
This also means, however, that there’s very little flexibility. So, if the variable loan interest rate is lower than usual, you’ll have to stick to the higher fixed rate.
On the other hand, a variable rate loan means the interest rate rises and falls over the life of your mortgage. This may happen in response to the Reserve Bank changing the official cash rate, or it may merely be a business decision by your financial institution.
The main advantage of a variable rate loan is flexibility, but this won’t necessarily work if you’re on a tight budget and need your payments to stay constant.
So, How Do Split Loans Work?
You’re essentially splitting your home loan into two separate loans charged at different rates. Usually, a portion of your loan balance is charged at a fixed rate for a while, while the rest of the balance is charged at a variable interest rate.
The main advantage of split loans is that it gets the best of both worlds – your fixed repayments are predictable, while your variable repayments can still get smaller if interest rates fall.
How Can A Finance Hub and Networks Mortgage Broker Help You with Split Loans?
We Help At Every Stage
At Finance Hub and Networks, we can advise you on whether opting for a split loan will have you paying less interest or more fees.
We Compare The Market
We compare loans from various lenders to ensure you are getting the best deal.
We Do All The Paperwork
With banks clamping down on applicants with stricter lending rules, you’ll want your application to be perfect. We take care of all the paperwork!
Split Loans FAQs
Could I End Up Paying Less Interest With a Split Loan?
Splitting your home loan could possibly help you pay less interest on your monthly repayments and over the life of your loan.
But home loans aren’t one-size-fits-all, so it’s best to chat to a Finance Hub and Networks mortgage broker to find out if split loans would be the best option for you.
Are Split Loans Higher in Lenders Fees?
Because you’re essentially dividing your loan into two, there is a possibility that you might end up paying more in fees than if you’d chosen one standard variable loan.
That is why it’s so important to get advice from a Finance Hub and Networks mortgage broker. At Finance Hub and Networks, we have access to various products from different lenders, and it may be that we can secure a deal that doesn’t require you to pay higher fees.
Make sure that your broker explains how each split loan option works, what it costs and why it’s recommended to you.
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