A split loan is a combination of fixed and variable rate loans. This type of home loan is best for people who want to have a fixed rate, but also want to be able to take advantage of lower repayments in case interest rate falls. A split loan also works for those who want certainty in repayments for the first year of the loan term and then transfer to variable loan later.

Advantages:

• Flexibility in redraw options.
• Ability to plan for interest rate risk.
• Ability to make lump sum repayments without penalty on the variable loan split.

Disadvantage:

• Still vulnerable when interest rate rises.