How Does a Split Home Loan Work?

The short answer

A split home loan divides your borrowing into two portions, one with a fixed interest rate and one with a variable rate, so part of your repayments stays predictable while the rest keeps the flexibility of a variable loan. You choose the ratio (say 30% fixed, 70% variable). The fixed portion shields you from rate rises, and the variable portion lets you make unlimited extra repayments and usually link an offset account (Moneysmart).

How a split loan works in Australia

With a split (or "partially fixed") loan, your lender treats your borrowing as two sub-loans under one mortgage. Each portion has its own rate, and your total repayment is simply the sum of the two (CommBank).

The trade-offs sit on each side of the split:

Portion	Pros	Cons
Fixed	Repayment certainty; protected if rates rise	No (or capped) extra repayments; break costs if you repay, refinance or sell during the fixed term; you miss out if rates fall
Variable	Unlimited extra repayments; offset/redraw access; benefit if rates fall	Repayment can rise if rates rise

Key Australian specifics to know:

• Offset usually only touches the variable portion. Money in your offset reduces interest on the variable sub-loan, not the fixed one (Westpac).
• Extra repayments are typically unlimited on the variable portion but limited or blocked on the fixed portion.
• Break costs can apply if you pay off, refinance or sell the fixed portion before the fixed term ends.
• Fees: some lenders charge two sets of account fees because you effectively hold two loans, so check the fine print.

There's no single "right" split. It depends on how much certainty versus flexibility you want, which is a decision for you (and, if you use one, a licensed adviser). True Loan only estimates the numbers.

Worked example: a $600,000 split loan

Say you borrow $600,000 over 30 years, monthly repayments, and split it one-third fixed / two-thirds variable:

• Fixed portion: $200,000 at 5.89% p.a.
• Variable portion: $400,000 at 6.10% p.a.

Portion	Amount	Rate	Monthly repayment
Fixed	$200,000	5.89%	$1,185
Variable	$400,000	6.10%	$2,424
Total	$600,000	—	≈ $3,609

For comparison, the whole $600,000 at a flat 6.00% over 30 years is about $3,597/month, so the blended split here costs roughly the same. That's the point: you're buying certainty on a slice without paying much of a premium.

Now add a sustained $30,000 offset balance. Because offset applies to the variable portion, interest accrues on $400,000 − $30,000 = $370,000 for that tranche, so that sub-loan clears years early while the fixed $200,000 runs its normal course. (If you instead direct extra repayments, they go to the variable portion in this model too.)

The maths is checkable: each portion is a standard amortising loan, and True Loan runs each tranche separately then sums them period by period.

Model this in True Loan

You can build this exact scenario at trueloan.app:

1. Set Loan amount to 600,000, Term 30, Repayment frequency Monthly.
2. Set the main Interest rate to your variable rate, e.g. 6.10%, which drives the variable (primary) portion.
3. Turn on the Split loan option and enter the fixed portion: amount 200,000 and rate 5.89%. True Loan treats the remaining $400,000 as the variable portion at the main rate.
4. To model the offset, use the dedicated Offset balance input (e.g. 30,000); it reduces interest on the variable portion. To model extra repayments instead, use the separate Extra repayment ($/month) input. These are two different inputs; don't combine them in one field.
5. Read off the combined repayment, total interest and the remaining-debt timeline.

Want to weigh a split against a fully fixed or fully variable loan? Put each on one side of the comparison tool and compare total interest and total cost over the life of the loan. See also fixed vs variable: which costs more and how much an offset saves on a $600k loan.

Common questions and mistakes

Can I offset the whole loan? Usually no: the offset typically reduces interest only on the variable portion. Modelling it against the full balance overstates the saving.

What ratio should I split? There's no universal answer; it's a personal choice about certainty versus flexibility. True Loan lets you test different splits, but it doesn't recommend one.

Will I dodge break costs? Only on the variable portion. The fixed portion can still trigger break costs if you repay early, refinance or sell during the fixed term.

What happens when the fixed term ends? The fixed portion rolls to a variable rate (often the lender's revert rate). See what happens when a fixed rate expires.

Do I pay double fees? Sometimes you may hold two loan accounts, so check ongoing fees with your lender.

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All figures are estimates for the 2025-26 Australian financial year. Rates, break costs and fees vary by lender, so confirm with your lender and check moneysmart.gov.au. This is general information, not financial or credit advice.