Loan Tip: Splitting the Split

You know that you can split a loan split don’t you?


Example

Homer has $500,000 in non-deductible debt so he splits the loan into

Loan A $300,000

Loan B $200,000

Homer debt recycles loan B into an income producing asset and the interest is deductible.

Homer thinks rates will rise so his plan is to fix both splits

But this will result in him losing his offset and he will not be able to debt recycle further. Homer could split loan A now

Loan AA $200,000

Loan AB $100,000

Then Homer could fix either Loan AA or Loan AB. The other will remain variable and he can have an offset account on that split and he can also debt recycle before the end of the fixed period.

 

Is it a simple call to the bank or do you need to go through a full refinancing again?

 

No need to refinance

 

Depends on the bank. St George for example, in my experience, will make you refinance.

 

I've done many loan splits for clients with St George and never had to refinance.
Only when new/additional funds being applied for would this be the case.