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Mortgage overpayments

(9 Posts)
AnneElliott Tue 10-Jan-17 12:42:48

We've got 2 mortgages on our property (as we ported our original one over when we moved). We are now in a position to start to overpay, but should we overpay on the mortgage with the largest amount (but with a lower interest rate of 2.09%) or the smallest amount (with a higher interest rate of 2.5%)?

I'm wondering if there's an easy way to work that out? I know credit cards you should pay off the one with the highest interest rate first, but mortgage rates are relatively low and the difference between the rates is quite small.

Any views from others?

Bluebell9 Tue 10-Jan-17 12:50:22

Can you use the mortgage calculators of the banks websites to see what effect the overpayment will have? HSBC have handy tools on their website.

eatsleepfeedrepeat Tue 10-Jan-17 12:53:22

Are there any penalties for over paying either mortgage? And how long is each one running for? Moneysavingexpert has a good overpayment calculator so you can see how much interest you'll save based on amount, duration, etc.

HeyMacWey Tue 10-Jan-17 13:06:36

In general you want to pay off the capital quickly as its this that the interest is calculated on, so I'd say make overpayments on I the one with the lowest interest rate first.
But yes, check the calculators for each mortgage.
Can you not make overpayments on both?

AnneElliott Tue 10-Jan-17 15:20:00

Thanks all. Will look at MSE.

We can overpay in both ( so could split the overpayments between both?) and no penalties unless we go over 10% of original advance - so we could overpay by £13k per year.

Notreallyhappy Tue 10-Jan-17 15:37:31

I'd pay the highest first. Check how much interest is added daily. Your loan company can tell you this on the phone.

GrumpyOldBag Tue 10-Jan-17 15:40:19

Surely it depends whether they are both fixed or variable rates and how long the fixed period lasts, if either is fixed.

I'd be focusing on paying off the one whose rate is likely to rise the first - so if they are both fixed, the one who's term comes to an end soonest.

GrumpyOldBag Tue 10-Jan-17 15:41:06

If you are in a position to do the maximum on both without penalty, then that's obviously the best way to go.

Wish we'd done this when we could.

AnneElliott Tue 10-Jan-17 22:34:58

It's a good suggestion re checking how much interest each one charges per day.

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