A split loan divides your mortgage into two or more portions — typically part fixed rate and part variable rate. For investment property, split loans allow you to hedge against rate movements while retaining the flexibility of a variable portion for offset accounts and extra repayments.
How a Split Loan Works
Example: $600,000 investment loan split as $400,000 fixed at 6.0% for 2 years and $200,000 variable at 6.2%. The fixed portion gives repayment certainty; the variable portion can be linked to an offset account to reduce interest.
Fixed vs Variable Split Strategies
| Strategy | Split Ratio | Best For |
|---|---|---|
| Conservative hedge | 70% fixed / 30% variable | Investors prioritising repayment certainty |
| Balanced | 50% fixed / 50% variable | Most investment property scenarios |
| Flexible | 30% fixed / 70% variable | Investors with large offset balances |
Pros and Cons of Split Loans
- Pro: Certainty on the fixed portion if rates rise
- Pro: Offset account benefits on the variable portion
- Pro: Extra repayments allowed on variable portion
- Con: Break costs on fixed portion if you sell or refinance
- Con: More complex to manage than a single loan
Frequently Asked Questions
Can I split an investment property loan?
Yes. Most major lenders offer split loan facilities on investment property loans. The split ratio is your choice and can be adjusted at each fixed rate renewal.
Does a split loan affect my tax deductions?
No. Both the fixed and variable portions of an investment loan are fully deductible as long as the funds are used for income-producing purposes. Keep records of each portion separately.
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