A Split Loan simply is cutting your loan into portions. Usually the split is a Fixed Portion and a Variable portion. The split can be set up at any percent eg: (50% - 50% split) or (70% - 30% split). For example a $100,000 Split Loan Account A $50,000 VARIABLE RATE Account B $50,000 FIXED RATE

You can have a split loan which is split into an interest only portion and a principal and interest portion. This is often used by investors when cross colateralised loans where the Owner Occupied property loan is Principle and interest and the Investment property loan is interest only, to make the most of tax deductability.

First home owners may wish to use a split of say 80% on interest only, perhaps fixed for 5 years to reduce the amount of repayments and a the 20% portion on Principal and Interest on Standard Variable rate so they can pay this portion off as quickly as they like.

What is the benefit of a Split Loan?

By splitting your loan, you are spreading the risk. If the rates go up there may be a benefit to you however if the rates drop than you may be caught paying too much. It is for that reason some people like to hedge their bet. Others prefer the security of a Fixed Loan ensuring a non-fluctuating rate of payment and allowing for better budgeting.