What you should know about Split Loans

Split loans, as the name implies, involve splitting a loan into two or more different types or structures.


Sometimes also called "Combination Loans”, these loans allow a borrower to have a portion of the loan under one structure and another portion under another structure.

Loans can be split as many times as you wish but most lenders will have a minimum dollar value for each split and additional costs for each split will be applicable.

Some lenders only charge the one establishment fee, even if the loan is split in two.

Splits are very useful when used to separate tax deductible interest payments.

When property investors use their existing house as equity to purchase an investment property, generally, they will fix that part of the loan used to buy the investment property and allow the home loan component to be variable.

They are usually able to set the fixed loan as Principal and Interest but Interest Only may be allowed by some lenders.

Split loans can be a careful way that investors can borrow for an investment property, if they are worried about interest rate hikes.

Not all loans can be split, usually loans that are securitised cannot be split, as the lender sells off the loan and the mortgage over the security. The lender cannot sell a portion of the mortgage, as the buyer of the loan package, wants total control over its security.


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Contact us @ propertyloans@realrenta.com


Marlene Liontis
Monday, 2 March 2020

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