Split Loans: Combining Fixed and Variable

A split home loan divides your borrowing into two separate portions — one with a fixed interest rate and one with a variable interest rate. Rather than choosing entirely between certainty and flexibility, a split loan lets you manage both within a single borrowing structure.

Split loans are a practical option for borrowers who want some protection against rate rises on part of their debt, while still maintaining the features and flexibility that come with a variable rate on the remainder.

How a Split Loan Works

When you split your home loan, the lender effectively creates two loan accounts — one fixed and one variable — that together make up your total borrowing. Each portion has its own interest rate, repayment schedule, and features.

For example, on a $500,000 loan, you might fix $300,000 at a fixed rate for three years and keep $200,000 on a variable rate. You make repayments on each portion separately, calculated on their respective rates. At the end of the fixed term, the fixed portion typically rolls onto the lender's standard variable rate unless you choose to refix or refinance.

The split ratio is up to you. Some borrowers go 50/50, others prefer 60/40 or 70/30 depending on their priorities. There is no single right answer — the appropriate split depends on your income stability, how much you need to make in extra repayments, whether you want offset account access, and how you feel about rate uncertainty.

Fixed Portion: What You Get and What You Give Up

The fixed portion of a split loan locks in your repayment amount for the fixed period. This gives you certainty on that portion of your debt — useful for budgeting and for managing the risk of rate rises on the majority of your borrowing.

The trade-offs on the fixed portion are the same as any fixed rate loan. Extra repayments are typically limited — most lenders cap additional repayments on fixed portions at between $10,000 and $30,000 per year. Offset accounts are rarely available on fixed portions. And if you need to exit the fixed portion early — due to refinancing, selling, or paying out the loan — break costs may apply.

Variable Portion: Features and Flexibility

The variable portion of the split retains the features that fixed loans cannot offer. On most variable loans, you can make unlimited extra repayments, link an offset account to reduce interest on that portion, and access a redraw facility if needed. You also benefit if rates fall on this portion, which reduces your overall repayment burden.

The variable portion also provides the exit flexibility that fixed loans lack. If you decide to refinance, you can move the variable portion without break costs — though moving the fixed portion may still attract a break fee depending on timing and market conditions.

Offset Accounts and Split Loans

One of the main practical reasons borrowers choose a split structure is to retain access to an offset account on the variable portion. If holding an offset account and directing savings there to reduce interest is part of your strategy, a split loan lets you do this while still fixing a portion of your debt for certainty.

For example, if you keep $50,000 in an offset account linked to the variable portion of your loan, that amount reduces the balance on which variable rate interest is calculated — saving you interest on that portion while your fixed portion continues at the locked-in rate.

When a Split Loan May Suit You

Split loans work well for borrowers who have a clear reason for wanting both structures — not simply because they cannot decide between fixed and variable. If you genuinely want some certainty on a portion of your debt and genuinely need the flexibility of variable on another portion, a split can deliver both.

A split loan may suit you if:

• You want protection from rate rises on the majority of your debt, but still need offset account access or the ability to make significant extra repayments
• You have a lump sum or savings you want to hold in offset against the variable portion
• You are uncertain whether you will need to refinance or sell during the fixed period, and want to limit your break cost exposure
• You want a structured approach to managing interest costs across a larger loan balance

Fees and Practical Considerations

Some lenders charge additional fees for maintaining a split loan structure, as it effectively involves two separate loan accounts. It is worth checking whether the lender charges separate account-keeping fees on each portion, and factoring that into the overall cost comparison.

When the fixed period ends on the fixed portion, you will need to make a decision — refix, switch to variable, or refinance. It is easy to miss this rollover date and end up on a revert rate that may be higher than available options in the market. Reviewing your loan well before the fixed term expires gives you more time and more options.

Check Your Borrowing Capacity

Use our borrowing capacity calculator to see what you may be able to borrow and explore how different loan structures could work for your situation.