05 Aug 2025 Split Loan Explained: Is It the Smart Way to Borrow?

A split loan is a flexible lending structure that allows you to divide your mortgage into two separate accounts: one with a fixed rate and one with a variable rate. It’s an increasingly popular choice for professionals in Melbourne who want greater control over their loan repayment strategy.

This type of home loan lets you enjoy the predictability of fixed-rate home loans while still taking advantage of potential interest rate drops through the variable-rate home loan portion. The result is a balanced approach to borrowing that can align with long-term financial goals, including future investment properties and managing cash flow.

For professionals in Melbourne, choosing the right home loan can feel overwhelming. A split loan offers a way to balance stability with flexibility. This guide explains how it works and how mortgage brokers in Melbourne, like EverLend, can help tailor the right structure for you.

How Does a Split Loan Work for Melbourne Professionals?

In a split-rate loan, your lender sets up two loan accounts under one contract. You choose how to divide the loan balance—for example, 60% fixed and 40% variable. Each portion is governed by its own loan terms and interest rate rules.

The fixed home loan portion offers stability for a set period (usually 1 to 5 years), locking in a set repayment amount regardless of market fluctuations. The variable rate portion, however, moves with the market and allows features like redraw, offset accounts, and flexible repayment schedules. 

This is helpful if interest rate drops occur, as you can benefit from reduced repayments on the variable side. Keep in mind that each lender may also include a comparison rate to help you better understand the true cost of borrowing, factoring in fees and charges.

Top Advantages of a Split Loan for Investment and Homebuyers in Melbourne

1. Repayment Certainty: Locking in a portion of your loan with a fixed rate helps you plan with confidence. You’ll know exactly what to expect for that part of your monthly repayment—no surprises from rising interest rates.

2. Flexibility on the Variable Side: The variable portion gives you room to move. You can:

• • Make extra repayments
  • Use a redraw facility
  • Link an offset account 

All of these options help reduce the interest you pay over time.

3. Faster Loan Payoff Potential: If interest rates drop, your variable rate portion could decrease too, allowing you to pay down your loan faster.

4. Strategic Advantage for Investors: Investors get the best of both worlds:

• • Fixed rates provide stability in the early stages
  • Variable rates allow for market responsiveness

5. Smart Portfolio Management: For those juggling multiple properties or interest-only loans, the mix of fixed and variable rates can support more precise financial planning and long-term strategy.

EverLend’s team of mortgage brokers in Melbourne can help you structure your split loan to match your goals. Whether you’re considering a flexible home loan or preparing for an investment loan, we’ll compare options across multiple lenders.

Risks and Considerations Before Choosing a Split Loan in Melbourne

1. Limits on Extra Repayments: The fixed portion usually has a prepayment threshold. Go over it, and you could face break fees or extra interest charges.

2. Break Costs for Early Exit: Planning to refinance or repay early? Doing so on the fixed side could trigger costly break fees, especially if market rates have dropped since you locked in.

3. Risk of Paying Above Market Rates: If you fix your rate and the market falls, you might end up paying more than current variable rates for the rest of your fixed term.

4. Revert Rates Can Hit Hard: Once your fixed term ends, your repayments may jump to a variable rate, which could be much higher than what you were paying.

5. Feature Limitations
   • Offset accounts usually only work with the variable side
   • Redraws may take days to process on some fixed portions
     Understanding which features apply to which side is essential.

6. More Accounts, More Admin: You’ll need to stay on top of two separate loan portions, each with its own terms, repayment dates, and statements.

How to Apply for a Split Loan in Melbourne

1. Know Your Budget and Goals

Start by assessing:

• Your borrowing power
• How much certainty vs. flexibility you need in your repayments

2. Work with a Mortgage Broker

A trusted mortgage broker can help you:

• Structure your split loan
• Gather the right documents
• Submit your application to the lender

3. Prepare Your Documents

You’ll typically need:

• Income verification (payslips, tax returns)
• Proof of ID
• Details of existing debts and liabilities

4. Loan Application and Approval

The lender will assess your file for credit approval, which may take a few business days depending on complexity.

5. Review and Sign the Loan Contract

Once approved, you’ll confirm:

• The split breakdown (fixed vs. variable)
• Interest rates and repayment type
• Redraw and offset options, if available

6. Consider Interest Rate Lock

For the fixed portion, your lender may offer an interest rate lock to protect against rate changes before settlement.

7. Set Up Redraw or Offset (if applicable)

Decide whether you want to link an offset account or set up redraw access on the variable portion.

Need help weighing up fixed vs variable home loan options? EverLend’s Melbourne mortgage brokers guide you through the process from pre-approval to settlement. Call 03 7036 3356 to book a free consultation.

Frequently Asked Questions (FAQs)

What does a split loan mean?

A split loan is a home loan that divides your borrowing between a fixed rate and a variable rate. Each portion operates independently but under a single loan agreement.

Can you get a split loan in Melbourne?

Yes. Most lenders in Melbourne offer split loan products, and mortgage brokers can help you compare rates, features, and loan terms.

Is it better to have a split mortgage or a fixed/variable only?

A split mortgage offers the security of fixed repayments with the flexibility of a variable side. It suits many professionals who want both control and adaptability.

Are split loans available for investment loans?

Yes. Split loans are available for both owner-occupied and investment purposes, giving investors the ability to manage interest rate risk more effectively.

Can I change my split loan structure later on?

Generally, yes, but you may need to refinance or renegotiate your contract, and break fees may apply for the fixed portion.

What are the risks of break costs in fixed-rate periods?

If you repay the fixed portion early or switch lenders, you may be charged a break fee based on interest rate changes. Always read the fine print.

How do offset accounts work with split loans?

Offset accounts typically apply to the variable portion only. They reduce the interest you pay by offsetting the loan balance with your savings.

Conclusion

A split home loan can offer Melbourne professionals the best of both worlds: stable repayments on one side and flexible features on the other. Whether you’re buying your first property, refinancing, or planning for investment loans, this strategy helps you stay in control while managing long-term risk.

At EverLend, our team of experienced mortgage brokers in Melbourne help you compare lenders, structure your loan, and prepare your loan application from start to finish. Call EverLend today on 03 7036 3356 to speak with one of our brokers.