A split loan lets a first home buyer fix part of the loan and leave the rest variable. It gives some repayment certainty while keeping features such as an offset account or extra repayments on the variable portion. The trade-off is that each part comes with its own rules and costs.
If you are buying your first home in Cornubia, the structure you choose affects your repayments and how much flexibility you have in the early years. This guide compares the three options so you can decide which to discuss with your broker.
What Is the Difference Between a Fixed and Variable Interest Rate?
A fixed interest rate stays the same for an agreed period, while a variable interest rate can move up or down at the lender's discretion. Fixing gives you a known repayment for that period. A variable rate means your repayment can change, usually in response to lender decisions and wider conditions.
The main trade-off with fixing is reduced flexibility. Many lenders limit extra repayments on fixed loans, and breaking a fixed loan early can trigger break costs. Offset accounts and redraw are often limited or unavailable on a fixed portion, depending on the lender.
The main trade-off with variable is uncertainty. If rates rise, your repayments rise too. Variable loans more commonly come with an offset account or redraw, which can help you manage your cash flow.
How Does a Split Loan Work?
A split loan divides your borrowing into two parts, one fixed and one variable, with each part having its own balance and rate. You choose the proportions, such as half and half, and your lender sets the rules for each part.
The fixed part gives you a repayment that will not change during the fixed term. The variable part can use an offset account or accept extra repayments, which may reduce interest. Splitting does not remove risk. The variable part still moves with rates, and the fixed part can still carry break costs if you repay it early or refinance.
A split also means managing two loan balances, and some lenders charge a fee for each loan account. Ask your broker whether the lender you are considering does.
A Worked Example: Comparing Repayments at an Illustrative Rate
As an example, a buyer borrows $600,000 over 30 years, and the illustrative rate is 6.75% p.a. This rate is used for illustration only and is not a current offer. At that rate, principal and interest repayments are about $3,891 a month.
Consider a buyer who splits the loan, fixing $300,000 and leaving $300,000 variable. On the fixed half, repayments stay near $1,946 a month for the fixed term. The variable half starts at the same figure under this rate.
Now assume the variable rate rises by 1 percentage point, to 7.75% p.a. The variable half's repayment rises to about $2,149 a month. The total goes from about $3,891 to about $4,095, an increase of roughly $204 a month. If the whole loan had been variable, the increase would have been about $407 a month. If it had been fixed, no change would have applied during the fixed term.
The outcome is a smaller change in repayments if rates rise, in exchange for giving up the chance to benefit fully from a fall on the fixed half. Use our mortgage repayment calculator to test your own figures.
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Which Loan Features Matter Most for a First Home Buyer?
An offset account and redraw are the features most worth comparing, because they affect how much interest you pay and how readily you can reach your savings. An offset account is a transaction account linked to your loan, and the balance reduces the amount interest is charged on. Redraw lets you withdraw extra repayments you have made.
The trade-off is cost and access. Loans with an offset account can carry a higher rate or an annual package fee, depending on the lender. Redraw access may have limits or fees, and money in redraw is not always as accessible as a savings account.
If you want to keep a savings buffer, an offset on the variable part of a split loan can keep that money accessible while still reducing interest.
How Do Low Deposit Options Affect Your Loan Choice?
A smaller deposit can mean paying Lenders Mortgage Insurance (LMI) or using a government scheme, and either affects which loan structure suits you. LMI is a one-off cost that protects the lender, not you. It is usually added to the loan or paid at settlement, depending on the lender.
The Australian Government 5% Deposit Scheme lets eligible first home buyers buy with a 5% deposit without paying LMI. Housing Australia backs the lender for the part of the loan between the deposit and 20% of the property value. For Queensland, the price cap is $1,000,000 for the capital city and regional centres category, and $700,000 for other areas. The cap for a specific suburb depends on its postcode in Housing Australia's postcode search tool. Applications go through a participating lender, and Housing Australia's published materials do not state which loan features, such as fixed rates or offset accounts, are available under the scheme. Confirm this with your lender before you choose a structure.
In Queensland, eligible first home buyers purchasing a new home may also qualify for a $30,000 first home owner grant where the home is valued under $750,000. The grant is not available for established homes. For established homes, eligible first home buyers can claim the Queensland first home concession. No transfer duty is payable on a home valued at $700,000 or under, and the concession reduces up to $800,000. For agreements from 1 August 2026, each buyer must be an Australian citizen, permanent resident or specified foreign retiree, and must move in within one year of settlement. Rules for each scheme differ, so check eligibility before you commit to a contract.
A Second Example: Choosing a Structure for a Buyer Who Wants Flexibility
Consider a first home buyer in Cornubia who is saving a buffer and expects their income to rise. They are nervous about rate rises but want to keep extra cash accessible.
Their broker suggests a split loan with a smaller fixed portion and a larger variable portion linked to an offset account. The buyer fixes enough to keep a base repayment steady and keeps the rest variable so their savings can sit in the offset.
The outcome is a repayment that is partly predictable and savings that still reduce interest. The trade-offs are that the fixed portion limits extra repayments, and the buyer will pay break costs if they repay it early or refinance. They also need to watch the loan when the fixed term ends, as the rate will move to the lender's variable rate unless they choose another option. Our fixed rate expiry page explains what to expect.
What Does Your Borrowing Capacity Mean for Loan Structure?
Your borrowing capacity sets the size of the loan a lender will offer, and the loan structure you pick should still fit your budget if rates change. Lenders assess your income, expenses and debts, and they usually test your ability to repay at a higher rate than the one you pay. You can check your position with our borrowing capacity tool.
A pre-approval can help you shop with confidence, but it is not a final approval and conditions apply. Pre-approval is usually valid for a limited time and can change if your circumstances or the lender's policy change.
If you are comparing home loans for your first purchase, ask your broker to show repayments for each structure at a higher rate than you expect. This will show how much room you have in your budget. Our first home buyers page covers further steps for those buying in Cornubia and surrounding areas.
Wagstaff Finance can compare lenders, explain the trade-offs of each loan structure and help you prepare your application. Call one of our team or book an appointment at a time that works for you. Our Cornubia mortgage broker page has local contact details.
Frequently Asked Questions
What is a split home loan?
A split loan divides your borrowing into a fixed part and a variable part. You choose the proportions, and each part has its own rate and rules.
Can I use an offset account on a fixed rate?
It depends on the lender. Many lenders limit or do not offer offset accounts and extra repayments on fixed loans, so check before you choose.
Does the 5% Deposit Scheme limit my loan type?
Housing Australia's published materials do not state which loan features are available under the scheme. The loan is provided by the participating lender, so confirm the options with them.
What happens when my fixed rate ends?
Your loan will usually move to the lender's variable rate unless you choose a new fixed term or another option. Speak with your broker before the end date so you can compare choices.
