A split home loan offers a lot of flexibility to borrowers who want the benefits of two different types of loans. A home buyer can either apply for a split home loan up front or split an existing loan if that loan came with the ability to split among its extra features. A split loan is actually two loans: one fixed rate loan and one variable rate loan. Fixed rate loans give borrowers the stability of an interest rate that does not fluctuate with the changing economy. Variable rate loans give borrowers the possibility of savings if the Reserve Bank of Australia’s rates go lower. A split home loan allows home buyers to realize both of these benefits. The amount of the split, typically either 50-50 or 40-60, is negotiated by the borrower and the lender, as is the time frame of the split, which does not have to be for the entire life of the loan.
With so many variables, the calculator for the split loan is somewhat complex. Home buyers who want to look into the option of split loans need to plan for the type of split, the length of the split, split amount, and more. In order to use this calculator, here are the details you will be expected to provide:
Total Loan Amount: this is the total of the funds you think you’ll need. You should examine the housing market, along with your needs, to determine what is out there, what works for you, and what it costs.
Loan term: this is the length of the loan. Your personal preferences will determine this, since shorter loans are cheaper in the long run but more expensive monthly and vice versa.
Fixed portion: here you will list what percentage of the loan is fixed and how much is variable. You should at least run this calculator three times in order to get numbers for 40-60, 50-50, and 60-40.
Fixed period: of the term you already listed, how much of that term is fixed rate as opposed to how much of it is variable?
Rates: here you will list the fixed and variable interest rates. For this data, you will need to research lenders and get a good idea of what rates look like.
Payment frequency: just like other calculators, here you need to provide how often you plan on making payments on this loan.
As you can see, there are a lot of variables in a split loan. It is very important to use this calculator several times, each time changing variables, to really get a good idea of what benefits and drawbacks of a split home loan.
Important: This calculator is provided to be use as a guide only and should not be considered a quote, a loan offer, or investment advice. Other criteria may need to be considered, and before taking out a loan you should always consult with your personal financial adviser.