Split Loan
This is the best way to have an each way bet on interest rates. The majority of lenders now offer this loan type, which allows borrowers to fix the interest rate on an agreed percentage of their loan, keeping the other part variable.
You are not locked in to a 50/50 split – most lenders will allow you to have a split loan in almost any ratio. This presents you with the opportunity to experience the best of both worlds, and is ideal if you are not confident about committing completely to a fixed rate or a variable rate.
A major advantage of this loan type is the fact that you can continue to make extra repayments on your variable loan as it maintains all of its flexibility and options. Most fixed rates do not offer the option to make extra repayments, but they will provide some insulation if interest rates start to rise.
This loan type is becoming increasingly popular with borrowers who want to take advantage of the opportunity to spread the risk in uncertain economic times. It is important to compare split loans as fees and conditions vary greatly.
A less known but highly effective type of split loan facility is called a cascading split loan. This is where you have a number of split loans with a combination of variable and fixed rates each, all with different (cascading) expiry dates. This structure reduces the risk of all of your fixed rate loans expiring at the same time and at a period when rates might be at their peak.
