What is a split home loan?

A split home loan lets you divide your loan into two parts: one with a fixed interest rate and one with a variable rate. This gives you a mix of certainty and flexibility. The fixed portion stays the same for a set period, so your repayments on that portion won’t change. The variable portion can go up or down depending on interest rates, which might help you save if rates fall.

Split loans are popular with first home buyers, families and investors who want to manage their money smarter. They’re also useful if you’re unsure how interest rates will change in the future.

How does a split loan work?

Choosing your split

When you set up a split mortgage, you decide how much of your total loan will be fixed and how much will be variable. You might choose a 50/50 split, or lean more towards one side, like 70% fixed and 30% variable. The choice depends on your goals, how much certainty you want, and whether you plan to use flexible features.

Managing repayments

Even though your loan is split, you still make one regular repayment. Behind the scenes, your lender divides it between the fixed and variable portions. The fixed part stays the same for a set term, while the variable part can change as interest rates rise or fall. This setup helps you manage risk while keeping some flexibility.

Using tools and features

The variable portion of your home loan often gives you access to features like offset accounts and redraw, which can help reduce interest or give you access to extra funds. You can also make extra repayments on the variable portion without penalty.

Is a split loan right for you?

Split loans can be a smart choice, but they’re not always the best fit for every borrower. Whether it works for you depends on your financial goals, how you manage money, and your comfort with changing interest rates.

When it might suit you

  • You’re comparing different types of home loans and want a flexible option.

  • You’re planning to make extra repayments or use an offset account to reduce interest.

  • You’re buying your first home and want to ease into loan management with a mix of certainty and flexibility.

When it might not

  • You prefer simplicity and don’t want to manage two loan portions.

  • You’re planning to refinance or pay off your loan early, which could trigger economic costs (sometimes called break costs) on the fixed portion.

  • You want full access to redraw and extra repayments across your entire loan, which may not be available on the fixed side.

How to decide your split

Once you understand how split loans work, the next step is deciding how much to fix and how much to leave variable. There’s no perfect formula. Here are a few ways to think about it:

Budgeting vs flexibility

If you rely on a strict monthly budget, you might want a larger fixed portion to keep repayments steady. But if you value flexibility, like making extra repayments, you may prefer a higher variable portion.

Life stage and goals

  • First home buyers may choose a 50/50 split to balance certainty with flexibility.
  • Families managing school fees or renovations might lean more towards fixed for stability.
  • Investors may prefer more variable to support strategies like debt recycling.

Interest rate outlook

If you think rates will rise, fixing a larger portion could protect you. If you expect rates to fall or stay low, keeping more variable might save you money. You can explore how fixed and variable loans compare to help guide your thinking. Keep in mind that whilst there might be strong indications of interest rates rising or falling, nothing is guaranteed so it’s always good to plan for the unexpected too.

If you’re looking to restructure your current NAB home loan to include a split, you can use our simple instruction guide to learn more.

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The information contained in this article is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, NAB recommends that you consider whether it is appropriate for your circumstances. NAB recommends that you seek independent legal, financial and taxation advice before acting on any information in this article.

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