By opting for a split loan, you can enjoy the benefits of variable and fixed rates simultaneously. Essentially, this means that a portion of
your mortgage balance will accrue interest on a variable rate, while another portion will accrue interest on a fixed rate. Depending on your
lender, you have the liberty to divide your balance as per your preference. You may choose to split it in a 60:40 ratio, where 60% will be
subject to variable interest rates, while the remaining 40% will have a fixed interest rate for a specific duration. Alternatively, you can
opt for an even split of 50:50.
If we take the situation into consideration, a split loan with a 60:40 ratio would imply that $300,000 incurs a variable interest
rate, and the remaining $200,000 incurs a fixed interest rate, assuming a loan of $500,000.
When opting for split loans, you can reap the advantages of both rate types, which are usually mutually exclusive if you only choose
one. This entails having the opportunity to have an offset sub-account and make additional repayments based on your variable rate.
Meanwhile, your fixed rate can provide you with reliable cash flow regarding your monthly payments.
Having a fixed-rate loan ensures that your monthly payments will remain constant irrespective of any interest rate hikes, and if the
interest rate falls, you can make the most of your variable rate.