Overpaying the mortgage - main or sub accounts?

[Pogodogo18]

I’m starting to making a small overpayment on my 18yr mortgage from next month. Only £100 to start with but hopefully £200 a month from April.
I’ve got a main mortgage account and 1 ‘sub’ account from when I borrowed more money.

My question is whether anyone knows if it’s better to direct the overpayment at the main debt or the smaller debt? Or does it make no difference?

The smaller pot is at slightly higher interest at 1.59% versus 1.38% on the bigger debt.
Thanks

Usual rule is to pay off the higher interest first. The only thing to check is that throwing it all at the smaller pot won't exceed your penalty free overpayment limit.

In your cases, overpay the small pot as the interest rate is higher, but check that there are no penalties for overpayment. It's also 'tidier' in that you might completely pay it off quicker and be left with only one account.

However, I'd think twice about overpaying, that interest is very low and you should beat that by a significant margin over time by putting the money in a S&S ISA instead.

Do you have a separate cash emergency fund in case of income loss?

I paid off my sub account as it was higher interest rate. I was told for years that I couldn't pay it off separately as the monthly payments would be apportioned to each account and I couldn't pay extra on that specific one. I eventually spoke to someone who agreed to do it and then found out they paid it off the wrong one. They eventually sorted it (Lloyds) and it was so much easier to only have to think about one amount/account.

Thanks all. BarbaraofSeville yes it
is a low rate, and I wondered about stashing it, but it’s the fact that it shaves so much time off the mortgage that seems to win it. Do you mean put it in an account then pay off a lump sum?

Pissedoffneighbour22, that sounds like a hassle to deal with but glad you got it sorted eventually. I think that banks and building societies have got their acts together a bit more nowadays. Mine’s with Halifax, it looks like I can automatically apportion extra payments through online banking.

Hi we overplayed for the last 10 years - sometimes a little and sometimes a few hundred pounds and it is the best thing we ever did. We finished the mortgage at least 9 years early. We are quite boring in the sense that I don’t buy dvds or clothes particularly so rather than save i took it off the mortgage and it was great. We only have a flat but it also helped when we hoped to upgrade to a house ( still can’t afford to ) in the sense that our loan to value ration was favourable.

^Thanks all. BarbaraofSeville yes it
is a low rate, and I wondered about stashing it, but it’s the fact that it shaves so much time off the mortgage that seems to win it. Do you mean put it in an account then pay off a lump sum^

No, just let the mortgage run it's course. After 18 years, you should be left with a savings pot that's grown by more than the amount that your mortgage has cost you in interest.

If you can easily afford your mortgage, have an emergency fund, and spare money that is available to cover your mortgage if you lose your income, what is the advantage of paying off your mortgage? How do you expect things to change?

Your outgoings will reduce, you'll be able to save/invest more, but you've shortened the period that you can do this over, because you've concentrated on the mortgage. So that 'nice' feeling you get by not having a mortgage has probably cost you quite a lot of money to achieve.

I’ve stopped overpaying the mortgage when I realised my S&SISA grew nearly 20% in 3 years, whereas my mortgage rate is 1.44%…

Unless your mortgage is huge - I don’t think it’s worth it!

Thank you @oldageblah, that's exactly what I mean. People look at you as if you have two heads on here any time you suggest not rushing to overpay the mortgage.

The interest rate on ours is about 0.6%, and I get more interest than that leaving money in my current account and have reliably beaten it over the last few years with premium bonds, before any investment returns are taken into account.

Yup, the numbers don’t stack up… better to leave the ISA for 15 / 20 years, then take the nice, fat £££ and pay off the mortgage and go on a big big holiday!

A couple of things are probably influencing me. First, I’m 50, so I don’t feel I’ve got years and years left to pay off the mortgage. Not trying to sound gloomy but I’d feel differently if I was say, 38. I’m not sure I’ll be that employable in my current role at 60, or even 58 (I work in a young industry) so I suppose I’m trying to squeeze down the mortgage debt as much as possible so I can downsize if needed and then have some cash left over.
Second, my pension is very small and try as I might, I can’t see a scenario where I can make up enough lost time over the next 10 years or so. Values do go down as well as up, and I can’t afford to throw money at a pension if it sinks! Property seems a safer bet to me, plus if I overpay, I know it’s actually coming off the debt. It’s tangible!