Can anyone advise on mortgage overpayments pls?

[EinsteinaGogo]

I definitely know that we are so lucky not to be struggling right now so please don't take this as that kind of post.

Now we are working from home we are both saving on commuting costs. As we get the train into London this runs into hundreds of pounds each month and we want to overpay on the mortgage.

We have our house that's on a 5 year fixed rate mortgage. The rate is 2.6%.

We also have a rental flat that's now (legitimately) on a standard variable rate mortgage - around 1.2%.

Both mortgages allow overpayments well above the amount we are thinking of.

Does anyone in mortgage & finance know the which to overpay the most from the capital?

I would personally overpay on the one with the highest interest rates, however what is your LTV on each mortgage, as that might affect what I would personally ally do.

I am not in finance.

One will save you interest of 2.6%, the other 1.2% plus tax, which even at the highest rate is still less than 2.6%.
How are your tenants coping financially? You might want to build up a buffer considering there is a renters union asking their members to stop paying rents.
How did you manage to get a btl mortgage on a SVR of 1.2%?

I would be interested to know about how you got such a low interest rate on your rental flat- I have been looking to buy a property to rent and thought you could only get higher interest mortgages.

Oh and to answer your question, I would pay off the higher interest one, although I am sure the variable rate on the lower one will rise in the not so distant future so make sure you fix soon.

Hi all, thanks for the info.

We've had the rental flat since 2007.

It started off as a normal BTL rate; The SVR rate
was as a result of the original niche mortgage provider being bought out. After the fixed rate ended, it went on to SVR as the new .org no longer offer BTL products. Worked well in our favour.

Thanks for mention of rents. This tenant is currently paying 50% until September. We have funds to cover costs on this and our other BTL. Both are flats so service charges are the main overhead after interest-only mortgage repayments.

You would need to tell us outstanding balance on each mortgage for any useful advice. 1% of 500k is a lot more than 2% of 100k. Compound interest will get you if you don’t get it.

Well the usual answer is to pay the highest rate debt off first. But you said your BTLs are interest only - do you have a repayment vehicle set up for them? Are they held in a limited company? Probably worth doing an overhaul of your finances to see where you should be directing your money for maximum tax efficiency. But you might as well pay the money off your higher rate in the meantime.

sst1234
You would need to tell us outstanding balance on each mortgage for any useful advice. 1% of 500k is a lot more than 2% of 100k. Compound interest will get you if you don’t get it.

OP has a set amount of savings to pay towards a mortgage which is not close to the maximum amounts allowed. In this respect, the total amount of the mortgage is irrelevant but OP also needs to bear in mind that the capital on the interest only mortgage is not being paid off.

Thanks for the advice. Based on current values,
The LTV on the BTL flat is around 35%

LTV on our house is 30%.

We don't have an official vehicle to pay off the flat. As the balance is around £65k we have notionally planned to pay it down over the next 5/6 years then use some of my retirement tax free lump sum to pay the remainder.

If you needed to remortgage you’re BTL for whatever reason you should aim for a lower LTV to get a decent rate - also, property values and rents are likely to fall in the current climate.

For me personally with a long term view, I would be keen to reduce the LTV on my BTL even though I would save more money right now paying down my residential mortgage.

Your - not you’re