What Is Split Banking? A Simple Guide
When applying for a mortgage you might hear your adviser talk about “split banking.” It’s a term that can sound confusing,. Put simply it refers to the idea of spreading your lending across more than one bank or lender. In some situations it can be a smart way to protect your financial flexibility and reduce risk.
Here’s what split banking means, why people use it, and when it might be right for you.
The Basics: How Split Banking Works
Split banking involves having different parts of your borrowing with different lenders. For example, you might:
Have your home loan with Bank A
But keep your everyday bank account, savings, or credit cards with Bank B
In some cases, borrowers may even split their mortgage across two different lenders entirely — one for the main loan and another for a smaller top-up or investment property.
Why Do People Use Split Banking?
The main reason is control and flexibility. When all of your banking is with one provider that bank has more visibility and control over your entire financial life. If something goes wrong (such as missing a mortgage repayment or going into overdraft) they may have the right to use funds from other accounts you hold with them to cover what’s owed.
By keeping your accounts separate you reduce the risk of one lender having full access to your money. This is especially important if you’re self-employed, have variable income, or simply want more control over how your money is used.
Advantages of Split Banking
Protects your savings: If your home loan and savings are with the same bank, the bank may access your savings to cover missed payments. Split banking can prevent this.
Greater negotiation power: When your lender doesn’t hold all the cards you may have more flexibility to negotiate better terms or switch providers in future.
Easier to track expenses: Some people prefer to keep their mortgage and bills completely separate from everyday spending.
Things to Consider
While split banking can be helpful, it also comes with a few things to watch out for:
You may miss out on some package deals or interest rate discounts for bundling services
Managing multiple banks can take more admin (e.g. extra logins or app access)
If your lending is split across banks refinancing can be more complex down the track
Is Split Banking Right for You?
Split banking isn’t for everyone, but it can be a useful strategy especially if you want to keep your savings protected or avoid having all your finances tied up with one bank.
If you’re unsure, speak with a mortgage adviser. They can help you weigh up your personal situation and decide whether split banking is the right move for your home loan and long-term financial goals.