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Split Home Loans: How to Fix Part and Keep Part Variable

5 min read · by Ugur, demir.loans

Fixed or variable is usually framed as a bet: lock in and hope rates rise, or stay variable and hope they fall. A split loan takes the bet off the table. You fix part of the balance for certainty and keep the rest variable for flexibility, so whichever way rates move, part of your loan is on the right side of it.

How a split loan works

A split loan is one home loan divided into separate portions, usually one fixed and one variable. Each portion has its own interest rate, its own repayment and its own rules, but they sit under the same loan and the same property. The split can be almost any ratio: 50/50, 70/30 or whatever suits your situation. Some borrowers go further and split the fixed part into different terms, so the fixed portions don't all expire at once.

What the fixed portion gives you

Certainty. The repayment on the fixed portion stays the same for the fixed term, whatever happens to rates, which makes budgeting easier. The trade-off is flexibility. Extra repayments on a fixed portion are often capped, offset accounts usually can't be linked to it and paying it out early can trigger a break cost. Fixing a portion makes most sense for money you're confident will stay in the loan for the whole fixed term.

What the variable portion gives you

Flexibility. The variable portion is usually where the loan features live: an offset account, unlimited extra repayments and redraw. If rates fall, this portion benefits straight away. If they rise, so do its repayments. It's also the part you can pay down hard, refinance or restructure without a break cost, which makes it the natural home for any money you might want to move.

How to choose the split

Start with your savings. If you plan to keep a buffer in an offset account, the variable portion needs to be at least as big as that balance, or part of the offset does nothing. Then think about how much repayment increase your budget can absorb if rates rise, and fix enough to protect that. Consider your plans too. If you might sell, refinance or make a large lump-sum payment within the fixed term, keep the fixed portion smaller so those plans don't trigger a break cost. There's no right ratio in general, only one that fits your numbers.

When the fixed part ends

When the fixed term expires, that portion rolls onto the lender's revert rate, just like a fully fixed loan. That's the point to review the whole loan: fix again, merge it into the variable portion or rethink the split. The same timing rules apply, including allowing for discharge time if you're moving lenders. For the full timeline, see Fixed Rate Ending? What to Do Before It Rolls Over in the Learn section.

Questions to answer before you split

How much will you realistically keep in an offset account over the next few years?
How much could your repayments rise before your budget starts to hurt?
Are you planning extra repayments, and roughly how much each year?
Is there any chance you'll sell, refinance or restructure during the fixed term?
Would different fixed terms suit you better than a single fixed portion?
Does the lender charge any fees for splitting, or for adding splits later?

Questions, answered

Can I have an offset account on a split loan?

Usually, yes, but it's normally linked to the variable portion only. That's why the size of the variable portion matters if you plan to keep savings in an offset.

Can I change the split later?

Often, yes. The variable portion can usually be restructured at any time, but changing the fixed portion before its term ends can trigger a break cost. Some lenders also charge a fee to restructure. Changes are usually simplest when the fixed term expires.

Is a 50/50 split the safe choice?

Not necessarily. It's a common starting point, but the right split depends on your offset balance, your budget and your plans. A borrower with large savings in offset might want a much bigger variable portion, while someone on a tight budget might want more fixed.

Can investors split their loan too?

Yes. Investors can split between fixed and variable, and sometimes between principal-and-interest and interest-only repayments. It's also useful for keeping different loan purposes in separate portions, which can make record keeping simpler. Get tax advice on how you structure investment debt.

Talk it through

General information only, so the next step is applying it to your numbers. Book a chat, email ugur@demir.loans or call 0495 000 228. Free, no obligation.

This article is general information only and doesn't take your objectives, financial situation or needs into account. Scheme rules, thresholds and fees change; check current figures before relying on them. No interest rates are quoted on this website.