If you are looking for the stability of a fixed home loan and the flexibility of a variable rate home loan in one deal, you can go for a split home loan. This
Different Home Loan Types
type of loan combines the benefits of a variable and a fixed interest rate into one home loan. Borrowers can customize the mix of both loan types into various percentages like the 60% variable, 40% fixed and the more popular 50/50 split home loan.
Split home loans will benefit you in times of market instability especially during periods of rate appreciation. With a split rate home loan, borrowers are immune against the higher rates while keeping their loan at normal variable rate prices.
Borrowers who would like to buy a new residence or purchase a property as an investment can avail of a split home loan. You also have the freedom to change the loan’s specifications according to your financial capabilities. Most of the time, borrowers arrange a 50/50 set-up to equally experience the advantages of both the fixed rate and variable rate loan.
But since it is part-fixed loan, you can be penalized if you try to make advanced repayments to pay off the loan before it is due. You may also be charge with account fees, discharge fees and set-up fees from both the fixed and variable parts of the loan. You might also get confused with the monthly repayment amount since you have to consider that the loan is part-fixed rate and part-variable rate.
However, this set-up makes you partly unsusceptible to interest rate increases thanks to the fixed rate part of the term. A drop in repayments is also imminent due to the variable home loan conditions of the split loan. To better understand the nature of the split loan, you must thoroughly review its conditions once in a while. You might even discover new features that you thought you did not have.
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