Can someone with a good maths head help me re: mortgage interest?

[MegBusset]

We have two parts to our mortgage.

Approx £140,000 on a fixed rate of 4.48% that expires next April (eek).

An additional £40,000 on a tracker (currently c.6%) that has 1.5yrs left to run.

The total term of the mortgage is the same on both parts (21 years left).

I want to use spare cash to make overpayments each month but can't work out which part it makes most sense to overpay on? Can anyone help?

Should have said they are both repayment mortgages.

I would have thought that paying it off the tracker part would reduce the amount you owe as 6% of 40,000 is 2400, whereas 4.48% of 140,000 is 6272.
Obviously though as you reduce the amount you owe, 6% and 4.48% of the new amount gives a different amount for you to consider.

The logical thing to do would be to pay off the one with the higher interest rate, but seeing as your fixed rate comes to an end first, it might be best to pay off as much as you can from this one, because when you remortgage, the rate is likely to be a lot higher than it currently is.

This will then partly soothe the pain when you come to remortgage.

I'm no financial wizard though !

Thanks, MrsB I thought that too, not sure if compound interest comes into it though

If you want to overpay, pay off the one with the larger interest rate first - but check there are no penalties for early repayment.

Pay off the one with the highest interest - even though it is a smaller debt - compound interest issues do not figure in the choice.

If this can wait until next monday i will ask at my money class.

In return can you have a look at my thread about organising money and give me your views pls.

I would still pay off the higher interest rate. By next april things may have calmed down and whilst you won't be able to get a new mortgage at 4.48% you should be able to get something at around 6%, especially if you are willing to fix again.

Just check also that any overpayments are credited straight away - ie, you stop paying interest on the amount you've overpayed as soon as you overpay it

Can I just check, are overpayments directly set off against the mortgage or mortgage and interest?

The overpayment will come off the capital so if you paid of £10k you would be paying the same rate of interest but on a lower capital amount.

You should pay it off the fixed rate part since this is the part you will need to remortgage at a higher rate.

But she won't need to remortgage at a rate higher than 6%, so should pay it off the tracker

Can you pay off the fix without incurring a penalty? (ours allows 10% per year, some allow more, some nothing).
Is the overpayment credited when paid or annually (if annually then keep it in an interest bearing account until the time it will be credited).
All other things being equal pay off the higher rate first.

I can overpay by up to £500 a month (not that it will be anywhere near that amount, sadly!)

Any overpayments come straight off the capital. Interest on the remaining capital is calculated daily.

Do you still wish for me to check this.?