A split mortgage divides your home loan into two or more portions — typically part fixed and part floating (or revolving credit). It’s the most common approach for NZ borrowers who want rate certainty without sacrificing all flexibility. Most major banks in New Zealand accommodate split structures with no additional cost.
Why Split Your Mortgage?
The core problem with choosing between fixed and floating is that each has a significant downside:
- All fixed: Lower rate, but no flexibility for extra repayments or lump sums without break fees
- All floating: Maximum flexibility, but the rate is typically 1.0%–1.5% higher — costing thousands more per year
A split mortgage captures most of the benefits of both:
- The fixed portion secures a competitive rate on the bulk of the debt
- The floating or revolving credit portion absorbs extra payments, salary offsets, or lump sums without penalty
Typical Split Ratios
There’s no single correct split — it depends on your income, expected extra repayments, and comfort with rate risk. Common approaches:
| Split | Description | Suits |
|---|---|---|
| 80% fixed / 20% floating | Maximise rate certainty; small floating buffer | Most first home buyers; tight budgets |
| 70% fixed / 30% floating | Balanced; moderate extra repayment flexibility | Couples with some spare cash flow |
| 60% fixed / 40% revolving | Significant offset benefit; good income earners | High earners with surplus cash |
| 50% fixed / 50% revolving | Aggressive offset; strong discipline required | Very high earners; business owners |
How a Split Mortgage Works in Practice
Example: $700,000 mortgage
Split: $560,000 fixed at 5.50% (2 years) + $140,000 revolving credit (floating 7.00%)
| Component | Balance | Rate | Monthly interest |
|---|---|---|---|
| Fixed portion | $560,000 | 5.50% | $2,567 |
| Revolving credit | $140,000 (net) | 7.00% | Variable |
| Total | $700,000 | — | ~$3,400 |
If the borrowers park $20,000 in salary in the revolving credit account on average through the month, the daily interest calculation benefits from the reduced balance. With $20,000 average in the revolving credit account on $140,000 outstanding, the net average balance is $120,000 — saving approximately $1,400/year in interest on that portion.
Fixing Multiple Tranches at Different Terms
Advanced split borrowers sometimes fix different portions at different terms — a strategy called laddering:
Example: $750,000 total
- $250,000 fixed at 1 year (5.55%)
- $250,000 fixed at 2 years (5.45%)
- $250,000 fixed at 3 years (5.55%)
Benefits of laddering:
- Part of the loan rolls over every year, giving you regular opportunities to renegotiate rates
- Reduces the risk of all your debt rolling over at once at an unfavourable rate
- Spreads the maturity risk — if rates are high in any one year, only a portion is affected
Downside: More complexity to manage. You need to track when each tranche expires and proactively renegotiate each one.
Split Mortgages and Revolving Credit
The most powerful combination for salary earners is:
- Large fixed tranche at the lowest fixed rate available
- Smaller revolving credit facility where salary is credited
The revolving credit portion earns a daily offset benefit (every day your salary sits in the account reduces the balance on which interest is charged) while the fixed tranche maintains rate certainty.
See Revolving Credit Mortgage NZ for how the offset mechanism works.
Can All NZ Banks Do Split Mortgages?
Yes — all major NZ banks (ANZ, ASB, BNZ, Westpac, Kiwibank) can structure split mortgages. There is typically no additional cost for splitting. The minimum amount per tranche varies by bank but is usually $20,000–$50,000 — so a split only makes sense on a mortgage above approximately $100,000.
When to Review Your Split
Your split structure should be reviewed at every fixed term rollover. As you pay off the loan, the optimal split ratio may change. After 10 years, you may find:
- The loan is smaller and the revolving credit portion now represents a higher proportion of the total
- Your income has changed, altering how much you can park in the offset
- Rate conditions have changed, making a different fixed term more attractive
Further Reading
- Fixed vs Floating Mortgage NZ — the core rate decision
- Revolving Credit Mortgage NZ — the floating component option
- Floating Rate Mortgage NZ — standard variable rate structure
- When to Fix Your Mortgage NZ — timing fixed rate decisions
- Refixing Your Mortgage NZ — managing rollover