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What is a ‘split’ home loan?

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If you’re currently looking into home loans, you may be weighing up whether a fixed rate or a variable rate is right for you. Fixed rate loans can give you a measure of certainty while variable loans are more flexible. Making a choice between the two can be daunting, especially as signing up one way or the other can lock you in for a period of several years.

But there is a third option, which may give you the best of both worlds: a split rate home loan.

What is a split rate home loan?

A split rate home loan, also known as a split mortgage, allows you to divide your home loan into multiple accounts, each of which has different interest rates and features. The most common way to set this up is to have a portion of the loan at a fixed interest rate, while the remainder has a variable interest rate.

Why would you choose a split rate loan?

Fixed rate and variable rate loans each have their own advantages and drawbacks. By choosing a split loan, you may get the benefits of both sides while potentially reducing risk and the possible downsides of each.

The fixed rate portion of the loan delivers security as it allows you to lock in an interest rate for an agreed period - usually anywhere between one and five years. This protects against interest rate changes, ensuring that this portion of your mortgage loan repayment won’t increase even if interest rates do. However, the flip side of this is that you wouldn’t benefit from a drop-in interest rates if they change during your fixed term period.

The variable rate portion may offer more flexibility and allow you to take advantage of potential decreases in interest rates. You may also be able to make extra repayments to pay off your mortgage more quickly and have access to an offset account which can reduce the interest you pay. The downside of a variable rate is that your repayments would increase if the interest rate goes up.

What could a split loan look like?

By splitting the mortgage 70/30 across two loans, a buyer can access the low fixed rate now but may still benefit from any potential reduction in interest rates in the future on a portion of the loan.

Using our split loan calculator, we can see that the monthly repayments on the split loan would be $2,406** - based on a $500,000 home loan, fixing 70% at 3.09% for 5 years and the remaining 30% at a Low Cost variable rate of 3.24%. These rates are based on an owner-occupied home loan with principal and interest repayments and with a deposit of 20% or more (as at the date of this article).

If a Low Cost variable rate was selected for the entire balance, then the monthly repayments would be slightly higher at $2,434**.

split loan calculator

Is a split loan right for you?

Whatever loan you decide to take out, it should have the features, flexibility and fees that are best suited to your individual needs. Before you make a decision, you may want to consider things such as:

  • What you think the interest rate cycle will do in the future.
  • The relative importance to you of certainty vs. flexibility.
  • If your personal and financial circumstances are likely to change in the future.
  • How important features like additional repayments and an offset account are to you.

If you are unsure of the implications of a split home loan or would like some guidance, it can be a good idea to seek advice from a professional financial planner before you make a decision.

Learn more

Visit our home loans page to find out more.


Qudos Mutual Limited trading as Qudos Bank ABN 53 087 650 557 AFSL/Australian Credit Licence 238 305. The information in this article is of a general nature and has been prepared without considering your objectives, financial situation or needs. Before acting on the information, consider its appropriateness to your circumstances.

Loans are subject to approval. Normal lending criteria, terms and conditions and fees and charges apply. Mortgage insurance is required for home loans over 80% and is subject to approval.

**The results from this calculator should be used as an estimate only. Results do not represent either quotes or pre-qualifications for a loan. Qudos Bank may not provide loans with the details indicated in the calculator. The specific details of your loan will be provided to you in your loan contract. The calculator relies on a number of assumptions, for example, that at the end of the fixed period, the fixed rate reverts to the variable rate entered into the calculator. In practice, fixed rate loans do not revert to a variable rate product, but rather a set revert rate. For a full description of the assumptions relied on by the calculator please see our Split Loan Calculator.


Article published November 2019