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Switching (or Split) Loans

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Description

Switching enables customers to change the 'loan type' and 'repayment type' of their existing home loan or Viridian Line of Credit without the need for a new loan application to be completed.

Splitting enables customers to split their existing home loan/ investment home loan to multiple loans without the need for a new loan application to be completed. Splitting an existing loan is considered switching a portion of the loan.

Note:

  • The decision whether to switch (or split) must be made by the customer. Commonwealth bank staff and Brokers must not recommend a particular course of action to make any predictions about interest rate movements.
  • The customer will receive the interest rate that is current at close of business on the day that the request is received by the Bank.
  • Requests that do not satisfy the above must be processed as a new application, subject to the Bank's normal lending criteria.  

 

Allowable switches and split loans

Refer to the table Allowable and non allowable switches and split loans for details.

 

Changes not considered as switches.

The following are not available when switching and require a new application to be completed.  

  • Changes to borrowers, mortgagors and guarantors
  • Extending existing loan terms or amounts as part of a switch
  • Requests to switch to an Interest Only period where the total Interest Only period (i.e. initial period plus the period to be extended) exceeds the maximum terms specified in the Interest Only page. Note: requests for interest only that require assessment must be referred to Interest Only Specialists
  • Switching:
    • during a bridging period
    • from a home loan to an investment home loan or vice versa
    • from or to a Low Doc loan
    • between Commonwealth Bank and Colonial branded products
    • Request to switch to a Line of Credit loan

 

Conditions

Refer to the following to determine the applicable conditions when switching (includes splitting) 

 

Description Conditions
Loan is unfunded/ partially funded Not allowed.
Method of Operation The customers must provide the method of operation where the existing home loan account is noted as 'To be advised'.
Switching 'Loan Type'
  • If the existing loan account has a Mortgage Interest Saver Account (MISA) and customers are switching to a product that does not allow a MISA, funds held in the MISA must be withdrawn prior to the switch. The rate of offset on the MISA may change depending on the loan type being switched to.
  • The customer switching to a Fixed Rate will not have access to Repayment Redraw during the Fix Rate period. Therefore, any required amount must be withdrawn prior to switch. Any linked MISA will become partially offset.
  • Customers switching to a Rate Saver- Base Variable with Interest Only, will not have access to Repayment Redraw for the life of the loan even when the loans rolls over to Principle and Interest repayments. Customers that prefer access to Repayment Redraw must switch to a loan type which offers that feature.
  • Customers cannot switch from the No Fee Variable Rate Home/Investment Home Loan. If a customer wishes to change the 'Loan type', after the first 12 months they can apply for a variation to contract (which is outside the current switching process) to move to another loan type where fees are payable.
  • Customers cannot switch to an Extra Home/Investment Home Loan. A switch to Extra Home/Investment (Life of Loan) is not permitted from VLOC, switch from Base Variable or No Fee requires Home Loan Product approval and from other loan types must meet minimum new borrowing eligibility criteria i.e. top up by $150,000 or more
Switching 'Repayment Type'
  • The Interest Only period must be in years.
  • An Early Repayment Adjustment (ERA)/ Early Termination Interest Adjustment (ETIA) will not apply for customers switching between Principal and Interest to Interest Only, and Interest Only to Principal and Interest (excluding Interest in Advance).
  • The loan must be in order and not in arrears.
  • Interest Only is not available if the remaining loan term is 5 years or less.
  • Interest Only is not available if maximum Interest Only terms for the life of the loan have been reached.
  • Customers requesting a switch from Principal and Interest to Interest Only, will be subject to a serviceability assessment.
  • Customers requesting an extension of an existing Interest Only term (including interest in advance), may be subject to a serviceability assessment depending on the circumstances of their loan.
Switching 'Repayment Type'
Interest in Advance loans only)
Note: The Interest in Advance repayment option is only available on Interest Only Fixed Rate Investment Home Loans.

From an Interest In Advance loan

  • An Early Repayment (ERA)/ Early Termination Interest Adjustment (ETIA) will apply for customers switching from an Interest In Advance loan.

 

To an Interest in Advance loan

  • When switching to an Interest In Advance repayment, any existing Repayment Redraw and /or MISA balance must be cleared prior to processing the switch. The Repayment Redraw balance can either be withdrawn by the customer or placed in permanent reduction of the loan.
  • An Early Repayment Adjustment (ERA)/ Early Termination Interest Adjustment (ETIA) may apply for customers switching to Interest In Advance.
  • The Interest In Advance period and the Fixed Rate period must align.
  • When switching to an Interest In Advance investment home loan the loan is treated as repaid. Therefore, the new Fixed Rate term will be re priced at the current rate.
  • Customers requesting a switch from Principal and Interest to Interest Only, will be subject to a serviceability assessment.
  • Customers requesting an extension of an existing Interest Only term (including interest in advance), may be subject to a serviceability assessment depending on the circumstances of their loan.
Switching between Low Documentation (Low Doc) loans

A Low Doc loan can be switched to another Low Doc loan type (after funding) in accordance with the switching policy for the applicable loan type.

Exclusions:

  • No Fee Variable Rate
  • 1 Year Guaranteed
  • 12 Month Discounted
  • 3 Year Special Rate Saver
  • Extra Variable Rate (Including Introductory Rate)
  • Equity Unlock Loan for Seniors
Guarantor written consent

Written consent/ acknowledgement is required from the guarantor prior to completing the switch request for switches to:

  • an Interest In Advance repayment type, including requests for an additional Interest In Advance period
  • an Interest Only repayment type, including requests for an additional Interest Only period (other than for Family Security Support which is ineligible for Interest Only repayments)

The switch should first be discussed with the guarantor separately to the borrower. Refer to Switching (or Split) Loans Process

Note: The interest rate changes applies from the date the bank receives the request( i.e. upon receipt of the borrower's and guarantors signed consent to switch) 

Packages If a customer applies for a package concession (eg. Mortgage Advantage) simultaneous to a request to switch, the application for the package concession must be processed prior to the switch.
 
Rate Lock Rate Lock is not available for switching requests.
Credit Assessment A credit assessment is required if switching to Interest Only payments / Interest In Advance where the switch request is within 180 days of the original loan funding date

 

Fees

No switching fee applies when a customer requests to switch from one loan type, repayment type, interest rate margin and/or reference interest rate to another. However, if they switch from a fixed rate loan, the customer may need to pay an Administration Fee and an Early Repayment Adjustment.

 

Interest Only Switching Fact Sheet

Switching Process