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
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
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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Monday, 2 March 2020