12 Benefits of Split Home Loans: A Strategic Choice for Canberra’s First-Time Buyers

Buying your first home in Canberra? You’re likely grappling with all the loan options out there. It can feel overwhelming trying to decide which one’s right for you. 

That’s where an experienced mortgage broker can be a game-changer. A broker can walk you through the process and explain each loan option to help you make an informed decision.

One loan type that’s becoming increasingly popular for Canberra’s first-time buyers is the split home loan. It offers a way to enjoy the benefits of both fixed and variable rates, making it easier to manage your repayments and interest. 

Got questions on split home loan? Not sure if it’s the best fit for you?

This guide will break down everything there is to know about split home loans. We will delve into how it works and the key benefits that make it a go-to home loan for first-time home buyers in Canberra.

What is a Split Home Loan and How It Works?

A split home loan is exactly what it sounds like – you split your mortgage into two parts. One portion has a fixed interest rate, and the other portion has a variable interest rate. 

This type of loan is designed to give you the best of both worlds. You get the security of the fixed rate while keeping some flexibility with the variable portion. It’s a popular choice for many first-time buyers because it helps manage the ups and downs of interest rates.

So, how does this split work? Imagine you’re taking out a $600,000 home loan. You decide to split it 50/50.

• $300,000 will be on a fixed interest rate of, say, 5% for 3 years.
• The other $300,000 will be on a variable rate that starts at 5.2% but could fluctuate based on the market.

With the fixed rate portion, your repayments are locked in for the fixed-rate period, meaning you know exactly how much you’ll be paying each month. Let’s say this portion has monthly repayments of $1,610. Even if the interest rates go up, this payment won’t change.

For the variable portion, your monthly repayments may start at $1,633 (based on the 5.2% rate), but this could increase or decrease over time depending on rate movements. If interest rates drop, your monthly payments could go down to, say, $1,500.

But if rates rise, you might be looking at payments of $1,700 or more.

Here’s a quick breakdown:

• Fixed portion: $300,000 at 5% = $1,610/month
• Variable portion: $300,000 at 5.2% = $1,633/month (subject to change)

So, your total monthly repayment for this split loan starts at $3,243, but the variable component may fluctuate.

This example gives you an idea of how a split home loan works, but the exact numbers will depend on the loan amount, rate terms, and current interest rates. Your mortgage broker can help run the numbers for your situation, ensuring the split ratio works for your financial goals.

12 Key Benefits of Split Home Loans

Now that you understand how a split home loan works, let’s dive into the reasons why it’s such a smart option for first-time buyers in Canberra. 

From providing flexibility in managing repayments to helping you make the most of both fixed and variable rates, here are 12 key benefits that make split loans a popular choice.

1. Combining the Best of Both Worlds

With a split home loan, you’re dividing your mortgage into two parts. One part has a fixed interest rate, and the other part has a variable rate. This way, you get the repayment certainty of a fixed rate while still taking advantage of any rate drops on the variable side.

2. Protection from Rate Rises

If you’re concerned about future rate movements, a split loan offers protection. The fixed-rate portion locks in a rate for a set period, so if the official cash rate goes up, only the variable portion of your loan will be affected.

This can reduce the impact of rising interest rates on your overall mortgage.

3. Flexibility with Extra Repayments

Want to pay off your loan faster? Split home loans often allow you to make extra repayments on the variable component without incurring penalties.

This flexibility means you can reduce your loan principal faster and potentially save thousands of dollars in interest over the life of the loan.

4. Manageable Monthly Repayments

Splitting your loan can make your monthly repayments more manageable. You’ll have part of your mortgage under a fixed rate, ensuring consistent payments, while the variable rate may fluctuate. This gives you better control over your loan repayments.

5. Benefit from Variable Rate Drops

While part of your loan remains protected under the fixed-rate period, the variable rate portion can go down when favourable market conditions arise.

This could lead to lower repayments on the variable side, allowing you to make additional payments or reduce your loan balance.

6. Offset Accounts

A split loan often comes with the option to link an offset account to the variable component. This feature allows you to reduce the interest charged on the variable portion by keeping your savings in the offset account, helping you save on interest.

7. Lower Break Costs

Compared to a fully fixed-rate mortgage, break costs on a split loan can be lower. If you decide to refinance or sell your property before the fixed-rate term ends, only the fixed portion of the loan is subject to break fees, which could save you money.

8. Tailored to Your Financial Circumstances

A split home loan offers customisation. You can adjust how much of your loan is fixed or variable based on your personal circumstances, financial goals, and tolerance for risk.

By doing this, you can tailor your loan structure to match your budget and future plans.

9. No Need to Predict the Market

Trying to predict when interest rates will rise or fall is a tough game.

With a split loan, you don’t have to guess. You’ve got part of your loan covered with a fixed rate, giving you peace of mind, while the variable part lets you benefit from any rate cuts.

10. Flexible Repayment Types

Split home loans come with a range of repayment types, including interest-only repayments on the variable side. This can help reduce your outgoings during tight financial periods, giving you breathing room when you need it most.

11. Access to Additional Features

Many split home loan products offer additional features such as redraw facilities on the variable side, or fee waivers for setting up offset accounts.

These features add further flexibility to how you manage your home loan, giving you more control over your finances.

12. A Balanced Approach in Uncertain Times

With ongoing economic uncertainty, a split loan provides a balanced approach to navigating the property market. You can protect part of your loan from rising rates while still enjoying the flexibility of a variable loan portion.

This makes it a smart choice for first-time buyers in Canberra who want to manage their mortgage responsibly.

How Does Utilising a Split Home Loan Fit Into Canberra’s Property Market Trend?

Canberra’s property market has remained relatively resilient, even amid broader national economic uncertainties. 

In 2025, the median house price in Canberra sits at around $906,529 (CoreLogic), making it one of Australia’s more expensive capitals for first-time buyers. 

But here’s the good news: despite high property prices, first-time buyers in Canberra can still find opportunities to enter the market, especially by leveraging the right loan structures like a split home loan.

Why Canberra’s Market is Perfect for a Split Home Loan

One of the main reasons split home loans are becoming increasingly relevant in Canberra is the unpredictability of the official cash rate. 

Currently, the Reserve Bank of Australia (RBA) has kept the cash rate at 4.10%, with speculation on whether this will rise further due to inflationary pressures. Given this uncertainty, Canberra’s property buyers—especially first-timers—are seeking ways to hedge their bets on interest rate fluctuations.

A Balanced Approach for a Fast-Moving Market

With Canberra’s median house price nearing the $1 million mark, the ability to handle both rising rates and fluctuating market conditions is crucial. 

Many first-time buyers are turning to split loans as a way to blend security and flexibility in this environment. The city’s mix of strong economic growth, stable employment (particularly in the public sector), and rising property prices make split loans a practical solution for managing both short- and long-term financial commitments.

Case Study: Amy’s Smart Loan Split

Amy, a first-time buyer from Belconnen, purchased her first home in mid-2023. 

Concerned about rising interest rates, she opted for a split home loan. Amy fixed 60% of her loan at a competitive fixed interest rate and kept 40% under a variable rate loan. 

Over the last 12 months, her decision paid off. The fixed portion gave her repayment certainty, while the variable side allowed her to make extra repayments during months when the variable rates dipped. 

By mid-2024, Amy managed to make significant inroads on her loan balance and saved thousands of dollars in interest, thanks to the flexibility of her split loan.

FAQs

What is a split home loan?  

A split home loan divides your mortgage into fixed and variable rate portions, giving you the benefits of both.

Can I make extra repayments on a split loan? 

 

Yes, usually on the variable portion, you can make additional payments without incurring penalties.

What are the downsides of a split loan? 

Potential downsides include break costs on the fixed portion and the complexity of managing two different rates.

Is a split loan better than a fully fixed loan? 

It depends on your financial circumstances. A split loan offers more flexibility if you want to hedge against future rate changes.

What happens when the fixed rate period ends?

 

Once the fixed-rate period ends, that portion typically rolls over to a variable rate, or you can refinance.

How do I decide the right split between fixed and variable? 

You should consider your risk tolerance, market conditions, and future financial goals. Chatting with a mortgage broker can help you decide.

Wrapping Up

A split home loan offers first-time buyers in Canberra a practical way to manage their mortgage with a mix of stability and flexibility. 

By combining the certainty of a fixed rate with the potential benefits of a variable rate, this loan type can help you feel more confident in your home-buying journey, especially in today’s market.

If you’re ready to explore how a split home loan could work for you, reach out to our team, we’ll help you find the right loan structure to fit your goals. Call us at 02 6173 6397 or visit Home Loan Brokers Canberra to get started today.