What is a split home loan?
If you are looking for ways to manage your loans strategically, opt for a split loan facility. Learn how it can benefit you.
What is a split home loan?
A split loan in Australia is a type of home loan that allows the borrower to divide their loan into fixed and variable portions. This allows them to have the security of a fixed interest rate on a portion of their loan while still being able to take advantage of any interest rate drops on the variable portion. This gives the borrower more flexibility and can help them manage their mortgage payments more effectively.
A split loan in Australia can also allow the borrower to divide their loan into fixed and variable portions. This allows them to have the security of a fixed interest rate on a portion of their loan while still being able to take advantage of any interest rate drops on the variable portion.
This gives the borrower more flexibility and can help them manage their mortgage payments more effectively.
A split loan facility is a feature that enables borrowers to split their home loans into two separate loans. Borrowers can use a split loan facility to manage their debt more effectively and efficiently.
Borrowers who opt for split home loans also benefit from tax breaks as the interest payments on the fixed part of the loan are generally tax-deductible.
This feature also provides flexibility to make extra payments towards the principal without any penalty for early repayment.
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How does a split loan work?
A split loan allows one part of the loan to be fixed at a particular rate while the other part can remain variable, depending on what suits your financial situation better.
Borrowers can use the split loan to minimise the interest rate risk and manage repayment commitments. Borrowers should consider their repayment commitments carefully when opting for the split loan facility.
The split loan feature requires careful planning and knowledge of the current interest rate environment before making any decision.
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Is split loan a good idea?
Split home loan options offer borrowers a range of benefits, including:-
- Minimise interest rate risk
- Tax benefits
- Flexibility
- Unlimited repayments
- Maximum returns
Things to consider before opting for a split loan facility
- Check whether your lender allows house loan splitting.
- If they don’t provide split mortgages and you want one, shop around for lenders and compare rates and benefits.
- Always use a split loan calculator before splitting your mortgage. This will help you to calculate which loan component requires what installments and interest rate.
How many times can I split my home loan?
As there is no hard and fast rule limiting the amount that can be split, you can split your mortgage in any way you see appropriate.
Some common loan splits are 50/50, 70/30, and 20/80, 20% for variable-interest loans and 80% for fixed-interest loans.
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