Split Home Loan

Welcome to our Split Home Loan or Structured Loan information page: This page is designed to assist you in understanding the basics of this type of loan and to give you an understanding of some of the features and downsides.

About Our services:

  • Our brokers are experts in obtaining home loan approvals and specifically trained in loan structuring and credit policy, ensuring the best possible outcome for your needs.
    • We provide an Australia wide service, at no cost to you.The lenders pay us a commission for the introduction of your business.
    • Our website is designed to help borrowers understand the differences between loan types and the importance of having a mortgage broker to assist you in finding the right lender.
About Split Home Loans:

What is a split home loan?

Providing you the security of knowing what your repayments will be on the bulk of your debt, therefore protecting you against rate increases, yet allowing you flexibility at the same time.

  • A split home loan is also known as a structured home loan. The basic principle behind this loan is that you might take two or more products from the same bank in order to maximise benefits to yourself.
  • An example of a split home loan or structured home loan would be as follows:
First, we have a standard variable-rate home loan at 5.49% as seen below.
Loan Amount $500,000
Interest Rate(s) 5.49% 30 years (variable)
Repayments $2,836/month 30 years
Features Extra Repay: Free additional payments are allowed
Interest Only: Maximum 5 years
Redraw: Minimum manual redraw amount is $1,000. Minimum online redraw is $50
Application Fee Legal: $440Application: $599
Monthly Fee $10
Discharge Fees $250: $250 per loan account
Total Interest $520,891
Total Monthly Fees $3,600 over 30 years
Total Setup Costs $1,039
Loan Term 30yrs
Total Loan Cost $525,530

We are able to recommend a very simple alternative to the loan above that will save our clients’ money and time in this loan.

In splitting this loan into two, and then also applying a professional package discount you can see the difference below.

Please take the time to look carefully at these calculations and understand where your mortgage broker can save you money.

Our service is free and we are definitely working for you and not the lenders.

Product 1

Product Name Packaged Variable-rate home loan
Loan Amount $50,000
Interest Rate(s) 4.83% 30 yrs (variable)
Repayments $263/month 30 yrs
Features Extra Repay: Yes, you can make additional regular or lump sum repayments at any time
Interest Only: Maximum IO period 5 years.
Redraw: Yes, no minimum redraw amount. Redraw via BPAY, Online Banking or Telephone Banking.
App Fee Legal: $220
Monthly Fee $0
Annual Fee $0
Loan Term 30yrs

Product 2

Product Name 3 Year Fixed rate with Package
Loan Amount $450,000
Interest Rate(s) 4.69% 3 years (fixed)4.83% 27 years(variable)
Repayments $2,331/month 3 years$2,366/month 27 years
Features Extra Repay: Additional repayments of less than $10,000 in any 1-year period without incurring break costs.Interest Only: Maximum interest only period 5 years.
App Fee Legal: $220
Monthly Fee $0
Annual Fee $0
Discharge Fees $250: Discharge Fee + legal costs
Total Monthly Fees $0
Total Annual Fees $0
Total Setup Costs $220
Loan Term 30yrs

In simple terms if you add the two repayment amounts together ($263 and $2,331 per month) you will see that we have a figure of $2,594 as a total payment amount.

In the first $500,000 loan, the repayment was $2,836 per month, so our client will now save $287 a month in interest – saving over $100,000  over a 30 year loan term.

It is important to note also that the cost to enter the first loan was over $1000 with ongoing fees each month on top of that, and that the split loan costs were only $220 with no ongoing monthly or annual fees. 

This will also save thousands of dollars for you over the term of your loan.

Should You Choose a split or structured Home Loan?

You will need to decide if the benefits outweigh the downsides before applying for a structured home loan.

It is important for us to do a comprehensive needs analysis on your circumstances in order for us to know where you will benefit in this type of loan.

It is not to say that this loan would not suit you, as we find that we are quite often structuring loans in order to maximise benefits to our clients and improving their financial circumstances.

The main thing to be careful of when applying for a split or structured home loan, is that you understand the lender and their products intimately. Your loan consultant will assist you in this area.

What benefits are there for you in a structured home loan?

  • The benefits to these loans are that you are now able to obtain a finance product that is geared to suit exactly what you are doing in the near future.
  • You are also not going to be penalized for wanting to save money by splitting and structuring your home loan.
  • Quite the opposite actually, it is going to save you money as long as you have the right structure set up, and also, as long as you qualify for this type of loan.
  • This type of loan can be used for personal purposes and investment purposes.
  • This loan is also available to first home buyers, clients wanting to refinance their loans, and also available to those wishing to purchase a first, second or third property.
  • It is available for most loan applications that are not of a commercial loan nature.

What do you need to be careful of in a split or structured home loan?

 

There is not a lot to worry about when you have a structured home loan, simply because it is normally mapped for your situation, protecting you from the elements that other loans have, that may be detrimental to you.

You will have noticed in our example that we used a fixed rate as part of our comparison. This would not always be the case. Please refer to the warnings on our fixed rate home loans page.

  • Wrong lender:
  • Quite often we meet clients who have the right idea regarding their structure, but they could have had the same structure with a different lender and saved substantially more in interest, fees and setup costs.
  • Wrong loan type:
  • In setting up a structured home loan, it is important to understand the reasons why you would structure your loan and how the relative loan structures and balances are going to impact on your financial circumstances.
  • We not only take care to select the most appropriate loan for you based on our panel of lenders, but we also educate our clients as to why we have selected a particular loan product for them.
  • Not enough choices:
  • We recommend that you speak with a mortgage broker rather than just one lender or bank if you are considering a split structured home loan.
  • We have access to many more loans because we are mortgage brokers.
  • This allows you to have choices rather than just get advice from one source.
  • It is not uncommon for clients to be in the wrong loan facility for a few years before they see us. Obviously those years are wasted as far as maximising your loan structure for your benefit.

How can I apply?

These are your simple steps to apply for a loan.

  • Contact us on the numbers above to speak to a mortgage broker, or complete our online enquiry form.
  • You will speak with a broker who will take into account your needs by discussing not only your requirements, but also any concerns you have, and offer you some possible strategies and ideas that you may not have thought about.
  • Once we know what you require, we will draft and email you a proposal– this will usually consist of a few options that are easy to understand.
  • Once you have had a chance to look at what options are available, you can contact your broker or the broker will call you, to discuss the proposal.
  • You can then decide if you wish to proceed or you may just want to discuss more options.

What are my other options?

There are many options available:

  • Whether you are after a variable interest rate, a fixed interest rate, interest only loan, equity loan or any of the other loans available, it is important that you find out what is available to you before applying for a loan.
  • The loans listed below are available for most lending purposes. Whether you are refinancing your home loan to a lower rate, or a property investor looking to buy that second or third property, we will have some ideas for you to consider.
  • Even if you are a first home buyer purchasing a new home or renovating your existing home, there are some great deals available from the banks and lenders that we are accredited with.
  • Please click on a link below to learn more about other loans that are available to you.
Summary:

NOTE: These pages are of general advice in nature. They have not taken into account your specific needs and objectives and are therefore designed to provide general information only. Before acting on any of the information contained on our website please have your Mortgage Broker assist you in determining the right product for your individual needs.

Posted 20 February 2015
Copyright © 2015 Illawarra Mortgage Brokers.

Specializing in Residential and investment lending.

Mortgage finance brokers located in the Wollongong, Corrimal, and Kiama and Shellharbour areas.

Lending Australia wide

Contact a broker
0242 575 626

Illawarra Mortgage Brokers

Corrimal - processing centre
0242 835626

Illawarra Mortgage Brokers

Kiama - administration
1800 729 633

Illawarra Mortgage Brokers