Quick answer
A fixed rate home loan locks your repayment for a set period, while a variable loan can move up or down with the lender's pricing and usually allows more flexibility. A split loan uses both. The right mix depends on your budget, plans and appetite for certainty. Ownright Custom Finance compares fixed, variable and split structures Australia-wide.
Key points
- Fixed loans give repayment certainty for a set period
- Variable loans move with the lender's pricing and are usually more flexible
- Split loans divide the balance between fixed and variable
- Break costs and extra repayment limits matter as much as the headline structure
- Suits
- Owner-occupiers and investors choosing a structure
- Security
- Residential property
- Choice
- Fixed, variable or split
- Australia-wide
- Yes
How do fixed and variable home loans differ?
The two main flavours of home loan differ in one big way: who carries the risk of movement. With a fixed rate loan, you and the lender agree on the rate for a set period, so your repayment stays the same however the market moves. With a variable rate loan, the lender can change the rate over time, so your repayment can go up or down.
Neither is better in the abstract. Fixing gives you certainty and a steady budget. Variable gives you flexibility, usually including freedom to pay extra or switch loans without a penalty. The sensible question is not which wins, but which fits your life.
What is a split loan?
A split loan divides the borrowed amount into portions, one fixed and one variable. A common idea is to fix enough to keep repayments manageable if rates rise, while leaving a portion variable for extra repayments or an offset account. There is no single correct ratio, and the available split depends on the lender.
Side-by-side comparison
| Feature | Fixed | Variable | Split |
|---|---|---|---|
| Repayment certainty | High during the fixed term | Lower, can change | Partly certain |
| Extra repayments | Often capped | Usually unlimited | Unlimited on the variable portion |
| Offset account | Often not available | Often available | Usually only on the variable portion |
| Leaving early | Break costs may apply | Usually simpler | Break costs on the fixed part |
| Feels like | A locked-in budget | A flexible tool | A bit of both |
Our guide on fixed versus variable loans goes deeper into the trade-offs without quoting rates.
Who tends to choose fixed?
- First home buyers who want a firm budget
- Households with tight cash flow and little room for surprises
- Borrowers expecting to hold the loan for the whole term
- People with a young family or a single income
- Investors wanting predictable holding costs
Who tends to choose variable?
- Borrowers who want to pay extra when they can
- Anyone planning to sell, refinance or restructure soon
- People wanting an offset account or a redraw facility
- Those comfortable riding out movements in repayments
- Borrowers who value being able to switch easily
What do lenders look at?
Lenders usually test your ability to repay at a buffer above the actual rate, so serviceability is calculated more conservatively than your real repayment. Income evidence, living expenses, other debts and the size of the deposit all matter. If you are self-employed or have non-standard income, read our pages on self-employed home loans and low doc home loans to see how that changes things. Our guide on loan serviceability covers the testing idea.
Things people forget to check
Break costs. Ask how a break cost would be calculated and whether it could be large if you needed to sell or refinance early.
Extra repayment caps. A cap on fixed loans can frustrate borrowers who receive a bonus or inheritance.
What happens at expiry. When a fixed term ends, the loan typically reverts to a variable rate. Lenders may offer a re-fix, but you should compare the market too.
Feature trade-offs. Offset accounts, redraw and package fees can differ between fixed and variable portions.
How Ownright helps you choose
Trevor Scott puts it simply: the best structure is the one you can live with at three in the morning. We ask about your budget, your plans for the next few years and how much uncertainty you can stomach. Then we show you fixed, variable and split side by side, with the features and constraints that matter, not just a headline.
We also check what happens next. If your fixed term is ending, we look at refinancing. If your bank has said no, we look further afield for lenders with different appetites. And if interest only suits a period of your life, we compare interest only home loans too. We work in every state and territory from Knoxfield, Victoria.
An illustration
Illustrative scenario only. A couple expecting their first child want a steady budget for the first couple of years but also hope to pay extra from tax refunds. A broker could suggest fixing a majority of the loan for certainty, leaving a smaller variable portion with an offset account for spare cash, and note when the fixed period ends so they can review.
Mistakes to avoid
- Fixing without checking break costs and extra repayment limits
- Assuming one structure is always cheaper
- Forgetting to review when a fixed term expires
- Choosing based purely on a headline number
- Not telling your broker about plans to sell or restructure
Can I mix fixed and variable across different loans?
Yes. Some borrowers fix one loan and keep another variable, especially when they have an investment property and a home. This is different from splitting a single loan, and it can let you treat each property differently. For instance, you might fix the owner-occupied loan for a steady household budget while keeping an investment loan variable for flexibility.
The catch is that more loans mean more things to watch: separate term dates, different features and, potentially, separate fees. We map it out visually so you know when each part ends and what you will do then.
How do I decide when I am unsure?
If you cannot decide, a split is a common middle path. Ask yourself two questions. First, how would my household cope if repayments rose noticeably? If the answer is poorly, more fixing may suit. Second, do I expect to sell, refinance or pay lump sums in the next few years? If yes, flexibility may matter more than certainty.
Our guide on interest only versus principal and interest is also worth a read, because the repayment type and the rate structure work together.
Documents to have ready
- Photo ID
- Payslips, tax returns or financial statements
- Latest loan and credit card statements
- Details of savings and the purchase or property
- Any existing loan documents if refinancing
Our guide on what documents you need for a loan has the full list.
Not sure which structure suits you?
Tell us about your budget and plans and we will lay out the options in plain English. Call 03 7043 7233 if you would rather talk.
Looking for a fixed, variable or split home loan?
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How it works, step by step
- 1
Step 1
Tell us your budget, plans for the next few years and how you feel about change.
- 2
Step 2
We compare fixed, variable and split structures and the features attached to each.
- 3
Step 3
We explain break costs, extra repayment limits and what happens when a fixed term ends.
- 4
Step 4
We lodge the application and diarise the end of the fixed period.
Frequently asked questions
What is the difference between a fixed and a variable home loan?
On a fixed loan the rate and repayment are locked for an agreed period, commonly one to five years, so they cannot change within that time. On a variable loan the rate can move whenever the lender decides, which can raise or lower repayments. Fixed offers certainty, variable usually offers more flexibility.
What is a split home loan?
A split loan divides your borrowing into two parts, one fixed and one variable. It lets you lock in certainty on part of the debt while keeping flexibility on the rest, for example to make extra repayments or use an offset account. The split can be any proportion the lender allows.
Can I make extra repayments on a fixed loan?
Often only up to a yearly cap, if at all. Many fixed loans limit extra repayments and may charge a fee or break cost beyond that. Variable loans typically allow unlimited extra repayments. If paying down debt fast matters to you, tell us so we can steer you to a suitable structure.
What are break costs on a fixed loan?
Break costs can apply if you pay out or refinance a fixed loan before the term ends. They reflect the lender's loss from unwinding the fixed arrangement and can be significant or nil depending on market movements. Your lender should explain how they are calculated before you fix, and we check this with you.
What happens when my fixed term ends?
The loan usually reverts to a variable rate, which may be less competitive than other options. It is a good time to review your loan, ask for a better deal, re-fix or refinance. We diarise it with clients so it does not slip by.
Can I get a fixed or variable loan if my income is unusual?
Yes, though the lender pool may differ. Self-employed, contract and low-doc borrowers can access both structures through suitable lenders, though some features may vary. Tell us how you earn and we will look at which lenders are comfortable with it.