Mortgage Overpayment Questions

[MortgageQuestions22]

We currently have 2 mortgages with Nationwide.

Mortgage no.1: £113k left. Interest rate: 1.39%. Fix ends Jan 2026.
Mortgage no.2: £70k left. Fix ending Dec, looking at remortgaging with a 2 year fix with an interest rate at 5.64%.

We currently overpay mortgage no.2 by £200 a month. This is because it was on a higher interest rate (2.09%) than mortgage 1 and with the fix on mortgage 2 ending this year along with interest rates going up, we wanted to bring down the total left on mortgage 2 as much as possible before remortgaging.

Going forward, I'm not sure which of the 2 mortgages to overpay. We're chosing a 2 year fix on mortgage no.2 so that they will both come to the end of their fixes together in Jan 2026, allowing us to hopefully shop around for a better deal with other lenders. Between now and Jan 2026, does it make sense to overpay the larger mortgage no.1 on the lower interest rate to try and reduce the larger sum? Or is it best to overpay the smaller mortgage no.2 which is on a higher rate but a lower overall amount? Just for additional info, we're already in the lowest loan-to-value ratio bracket in terms of favourable rates, both mortages have 15 year remaining terms.

Thanks!

Using the snowballing method, it would make sense to keep paying down whatever is the highest rate, clearing the higher interest rate sooner.

There’s normally mortgage overpayment calculators online (money saving expert website and I think HSBC had one). It’s probably worth playing around on those to see the amounts of interest you’d be saving on each mortgage if you were to overpay the £200

Clear the highest rate sooner

Thanks both. So best to still overpay on the smaller mortgage with the higher rate, even although they will both be up for remortgage together in Jan 2026? The plan then would be to combine them into one to make things simpler. By overpaying the higher interest rate one do we save more in interest payments between now and Jan 2026? I'm struggling to understand whether that's the case when they'll both need remortgaging in 2026 anyway?

Does the benefit come from the calculation of interest paid being done on a monthly basis? So by overpaying each month on the higher rate mortgage we do reduce the interest paid?

I would use the mortgage repayment calculator on money saving expert with 2 scenarios: your first mortgage over 3 years with the overpayment - see how much interest you save. 2nd scenario with your 2nd mortgage over 2 years, same overpayment. See which saves more interest

Thanks LemonFanta1, I've done as you advised and looking at interest saved between now and Jan 2026: overpaying on mortgage no.1 saves us £7340 in interest, whilst overpaying on mortgage no.2 would save us £7820 in interest.

Useful to know, I just couldn't work through what the steps were to figure it out. Much appreciated! Really wish my maths understanding was better 😖

You always save more if you overpay the higher interest rate mortgage first.

If you owe £70k @ 5.64% and you pay £436 per month over 25 years you repay £130,743. However, if you repay £436 + £200 = £636, you only repay £98,820 and your mortgage is cleared in 13 years. A saving of £31,923.

If you owe £113,000 @ 1.39% you pay £450 per month over 25 years you repay £133,850. If you over pay by £200 per month, you repay £126,360 in less than £17 years. A saving of £7,490 but you would have paid over £30,000 more on mortgage 1.

However, after 13 years you have paid mortgage 1 off, so you can then overpay mortgage 2 by an extra £636 per month. So paying £450 for 13 years leaves a mortgage debt of c£59,000, if you then pay (£450 + £636) £1086 per month you clear the remaining debt in less than 5 years (17 in total) a total of £131,450. So a saving of £2,400 on this mortgage but a total overall saving of £34,323.

Plus after 17 years you have no mortgage and can save £1,086 per month in a high interest account.

You always save more if you overpay the higher interest rate mortgage first.

Exactly this. You’re being charged more per £ of mortgage on the higher interest rate.

The other thing to consider is whether you’d be better off putting the overpayment amount into a savings account and then making a lump sum payment against the 2nd mortgage at the end of the fix period. The MSE overpayment calculator has an option to consider that. You can get 2 year ISAs at around 7% or so at the moment which would mean that you’d have extra money in Jan 2026 than if you had just gone for the overpayment. The extra money is what is earned by the overpayment amount at the different between the two interest rates (eg (200 x (7% - 5.64%)) x 24) - I’ve missed out the effect of compounding interest so it would actually be a bit more.