Split Loans: How Much Should You Fix?

Key takeaways

• Fix the portion you need certainty on; leave variable the portion you want flexibility on.
• Offset generally only works against the variable split.
• Break costs apply to the fixed portion if you exit early - including on sale.
• Two splits means two loan accounts, and often two sets of repayments to manage.

How do you choose the ratio?

Work backwards from your budget, not from a view on rates. Calculate the repayment on the whole loan at a rate 2-3 percentage points above today's. The shortfall between that and what you can comfortably afford is the exposure you need to remove - and that tells you the fixed share.

Then check the other direction. How much do you expect to pay off in extra repayments over the fixed term, and how much cash do you want sitting in offset? That amount needs to be on the variable side, because fixed loans typically cap extra repayments and do not offer full offset.

Where the two answers conflict, the budget one wins. Flexibility you never use costs you nothing; a repayment you cannot make costs you the house.

What does a split actually look like?

Illustrative structure on a $600,000 loan - the point is the shape, not the rates.

Note the last row carefully. If you sell the property during the fixed term, the fixed split is broken and break costs apply - and break costs are largest when market rates have fallen since you fixed. Anyone likely to sell inside the term should think hard before fixing a large share.

What are the drawbacks?

Splits are not free of friction.

• Two accounts to manage, sometimes with separate repayment dates and separate statements.
• Package fees may apply per package rather than per split, but confirm - some lenders charge per account.
• Refinancing is more complex while a fixed split is running, because break costs sit in the way.
• Offset effectiveness is reduced - if most of the loan is fixed, a large offset balance has less to work against.
• You cannot win the forecast either way. A split guarantees you are partly wrong regardless of what rates do, which is the entire point.

That last point is worth reframing as a feature. A split is a decision not to bet, and the cost of not betting is that you never get the best possible outcome. Most households should be happy with that trade.

Frequently asked questions

What is a good split ratio?

There is no universal answer, because it depends on how much repayment variability your budget can absorb and how much offset and extra repayment flexibility you need. Calculate your repayment at a rate 2-3 points higher and use the affordability gap to size the fixed portion.

Can I have an offset on a fixed loan?

Most lenders do not offer a full offset against a fixed rate portion, or offer only a partial version. That is one of the main reasons borrowers split - the variable portion carries the offset.

Do break costs apply if I sell during the fixed term?

Yes. Selling discharges the loan, which breaks the fixed rate contract, and break costs can be substantial - particularly if market rates have fallen since you fixed. Consider this before fixing a large share if a sale is possible.

Can I change the split later?

You can usually adjust at the end of a fixed term, and some lenders allow restructuring earlier subject to break costs on the fixed portion. Ask about the process before you commit rather than assuming it is easy.

Related reading

• Fixed vs Variable in a Hiking Cycle: The 2026 Decision Framework
• Break Costs on Fixed Loans: How They Are Calculated
• Offset Account vs Redraw: The Real Difference

Sources

• Moneysmart - choosing a home loan — ASIC
• Statement on Monetary Policy — Reserve Bank of Australia