Split loan calculator

How the split home loan calculator does the sum

Each portion is treated as its own loan and run through the standard repayment formula over the term you set. The two repayments are then added together, which is the headline figure. Nothing clever happens in between.

The blended rate on that example is 6.25%, which is simply each rate weighted by its share of the balance. It is a useful way to compare one split against another. It is not a rate you could go and ask a lender for.

A split is two loan accounts secured by the one property, under one application and usually on one statement. You do not apply twice, you are not assessed twice, and you have one lender to deal with.

What the fixed part buys, and what it costs

The fixed portion buys certainty on that slice of the debt. In the example above, the two point rise adds about $411 a month rather than the $821 it would add if the whole loan were variable. The fixed half absorbs exactly half of it, which is what the last row of the panel is showing you.

That protection is not free, and the price is paid in flexibility rather than in the rate.

• An offset account usually does not apply to a fixed portion, or only counts a limited balance
• Extra repayments on the fixed part are commonly capped at a set amount each year
• Breaking a fixed rate early attracts break costs, calculated from the movement in wholesale rates since you fixed
• If rates fall, the fixed portion keeps paying the old rate until the term ends
• Selling or refinancing inside the fixed term triggers those same break costs

Break costs are the one to take seriously. They are not a flat fee and they can run into five figures on a large fixed portion, so the size of the part you fix should be a number you are confident you will not need to disturb.

What the variable part is for

The variable portion is where all the useful machinery lives. It carries the features that let you attack the balance, and it is the part that benefits immediately if rates come down.

• The offset account, and the interest saving that comes with holding cash in it
• Extra repayments without a cap, and redraw on them
• The full benefit of any rate cut, on that portion
• Freedom to pay the portion out entirely without a break cost

This is why a split usually beats a fully fixed loan even for a borrower who wants certainty. Fix everything and you lose the offset and the extra repayments on the whole debt, not just on the part you were worried about.

How people actually choose the ratio

Most people reach for 50/50 because it feels balanced. There is a better way to arrive at the number, and it starts from your own plans rather than from a guess about the cash rate.

1. 1

   Work out the balance you will not touch

   The part of the debt you have no realistic intention of paying down early, and no plan to refinance or discharge inside the fixed term. That is the part it is safe to fix.

2. 2

   Leave the rest variable

   Everything your offset balance and your extra repayments are going to hit belongs on the variable side, where neither is capped.

3. 3

   Test the result against a rise

   Set the slider to that ratio and read the last two rows. If the buffered repayment is still affordable, the split is doing its job. If it is not, fix more.

On the same example loan, fixing 70% instead of 50% cuts the effect of a two point rise from about $411 a month to about $246. Fixing only 30% lets about $575 of it through. The slider is a dial on how much of that rise reaches your household budget.

When the fixed part expires

At the end of the fixed term the portion does not simply continue. It rolls onto the lender's revert rate, which is a variable rate and frequently not the sharpest one that lender offers.

Nothing tells you loudly when this happens. The repayment changes, the notice arrives among the statements, and plenty of borrowers sit on a revert rate for a year without noticing. Diarise the expiry date the day the loan settles.

You normally have three choices at that point, and the two or three months before expiry is when to price them, not after.

• Fix that portion again, for a new term and at whatever the fixed rates are then
• Let it fall in with the variable portion, which turns the loan back into a single variable one
• Refinance the lot, which is also the moment break costs are no longer in the way

This is also the moment a split can quietly become two loans on two different footings. If the revert rate is above what your variable portion is paying, consolidating them is usually the tidier answer.

What a fixed and variable split calculator cannot show you

The panel above is arithmetic on the two rates you typed in. It is a general estimate rather than an approval, and no lender has looked at your file to produce it.

• Whether either rate is available to you, which depends on the application and the valuation
• Annual package fees, application fees or any other cost of the loan
• The revert rate the fixed portion will roll to, which is not set until it gets there
• Break costs, which cannot be quoted in advance because they depend on rate movements
• Minimum split sizes, and how many splits a lender will allow on one loan
• The offset balance you hold, which changes the interest on the variable portion

The last two are the ones we get asked about most, and they are lender by lender rather than universal. We compare a panel of more than 40 lenders, so the question we can answer is which of them will write the split you actually want. Call 1300 813 113 and we will check it against your numbers.