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Split Rate
A split rate home loan combines the features of a fixed rate and a variable rate home loan. Therefore, you can enjoy the advantages of both loan types in one loan. Borrowers can even arrange the split of the split home loan according to their specifications. For example, they can have a split loan that is 60% variable, 40% fixed or a 50/50 split home loan.
Split home loans will benefit you in times of market instability especially during periods of rate increases. With a split rate home loan, borrowers are immune against the higher rates while keeping their loan at normal variable rate prices.
Split home loans can be used when you are buying a property or investing in residential properties. You may also fine tune the specifications of your loan according to your desired split. For best results, borrowers usually take the 50/50 split to have an equal taste of the benefits of the fixed and variable rate home loan.
Yet since a part of the split home loan is under the fixed rate type, you can get sanctions if you give additional repayments to speed up the payment process. There is also a possibility that you will be charged with discharge fees, account fees and set-up fees from the fixed and variable loan terms. You might have a hard time determining what exact repayment is due to the variable part of the split loan.
However, this set-up makes you partly immune to interest rate increases thanks to the fixed rate part of the term. To better understand the nature of the split loan, you must thoroughly review the conditions. You might even discover new features that you thought you did not have.
Choosing between a fixed rate and a variable interest rate loan is one of the most important home loan choices you will make, as it will determine the true cost of your loan in the long term. Each type of mortgage has distinct advantages. A split rate home loan is a great option, because you get a combination of the two.
What are the benefits of a split-rate home loan?
A fixed rate mortgage offers security, while a variable interest rate loan is more flexible, and offers a more competitive rate. With a split rate loan, you can customise your mortgage plan, so that part of the loan accumulates a fixed interest rate, and part will accumulate a variable rate. Borrowers commonly choose an even split between fixed and variable interest rates, or 60% variable and 40% fixed.
When is the best time to take advantage of a split-rate mortgage?
Split rate home loans are a great option particularly when interest rates are moving up, or during times of uncertainty in the financial landscape. The fixed rate part of the loan can provide you with insurance from unpredictably rising interest rates, while you still keep the lower variable rate on part of your mortgage plan.
What will a split-rate repayment plan look like?
One of the great advantages of this type of loan is that the repayment plan can be tailored to suit your needs. Your monthly repayments will be made up of fixed and variable interest rate components. A repayment calculator will give you a good idea of how much you can save, and how much money you can afford to borrow.
Visit eChoice online!
The best way to get started is to talk to a mortgage broker about your financial options. Visit eChoice for a consultation with an experienced mortgage expert.
