What Is Split Banking?
Split banking is the practice of having your lending spread across two or more banks. Instead of having all your property loans with one lender, you use different banks for different loans or properties.
For example, you might borrow the deposit for a new build from one bank using equity in your owner-occupied home, then fund the remaining 80% of the purchase with a second bank.
It’s a strategy that becomes increasingly useful as your portfolio grows—and one that can provide several strategic advantages.
Why Use Split Banking?
Protect Your Access to Sale Proceeds
One of the most important reasons to split your lending is to protect yourself when you sell a property. If all your lending is with one bank and you sell an investment property, the bank can reassess your situation and decide to hold on to the sale proceeds to reduce your overall debt. This might be triggered by a change in bank policy or a drop in your income—leaving you without access to funds you were relying on.
If that investment property’s loan is with a different bank, however, the sale proceeds are yours to keep, giving you more control over what happens next.
Increase the Equity You Can Access
Banks treat properties differently depending on whether they are new builds or existing homes. New builds are exempt from standard loan-to-value ratio (LVR) rules, meaning you only need a 10% deposit to buy one. But once the property settles, it’s reclassified as an existing property—and the bank will require 30% equity when assessing your ability to borrow again.
By splitting your lending, you can ring-fence the loan for that new build with one bank, and preserve borrowing power with another bank for future investments.
Reset the Clock on Interest-Only Loans
Many banks restrict how long you can stay on interest-only repayments—typically five years. Once that period ends, they expect you to start paying principal and interest, which can hurt cashflow and impact servicing. By refinancing and moving that loan to another bank, you can reset the interest-only period and continue to manage your investment with maximum flexibility.
Tap Into the Best Deals Across Banks
Lenders change their policies and offers all the time. One bank may offer a better rate, more favourable lending terms, or be more flexible about certain types of income. Others might offer cashback incentives that cover legal and moving costs. Split banking allows you to cherry-pick the best deals from each bank rather than settling for one-size-fits-all.
When Should You Use Split Banking?
You generally need to have at least two properties (or be buying your second) to make split banking work. It’s not usually possible to split one mortgage across two banks. Ideally, you’ll plan your split banking strategy from the start, but it can also be introduced later in your investment journey.
Even if your first few properties are with one bank, you can refinance an existing loan with another bank to restructure your portfolio. This gives you the opportunity to move away from a one-lender strategy and regain flexibility.
How to Set It Up
Option 1: From Day One
If you’re buying your first investment property, split banking is simple to establish. You use one bank for the deposit (usually via a revolving credit facility secured against your own home) and a second bank for the remainder of your purchase price.
This keeps your properties and lending clearly separated.
Option 2: Later in Your Investment Journey
If you already have multiple properties with one bank, your mortgage broker can help you refinance one or more of those loans with a different bank. This process involves applying for a new loan, paying off the old one, and handling the legal paperwork to transfer securities. There may be break fees or legal costs, but many banks offer cashback incentives that cover these costs.
Things to Consider
While split banking offers several advantages, it can also be more complex to manage. You’ll need to pass two banks’ lending criteria, which can make approvals more difficult, especially if your income is tight. Different banks have different views on property types, incomes, and risks, so working with a broker who understands the landscape is essential.
Real-World Example
Imagine you own a home and two investment properties, all mortgaged with one bank. You decide to sell one investment to free up $100,000 in cash. The bank reassesses your situation and decides to keep $75,000 of the proceeds to reduce your LVR, leaving you with only $25,000 instead of the full amount.
Had that investment been mortgaged with a different bank, you could have received the full $100,000 to use as you wished—perhaps to fund another investment or diversify elsewhere.
Is Split Banking Right for You?
It depends on your circumstances. If you're actively growing a property portfolio, want to keep your options open, or are planning to invest in new builds, split banking is worth exploring.
Speak with a mortgage adviser who understands investment lending strategies and can crunch the numbers to see if it fits your financial goals.
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