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    • Missdougal86
    • By Missdougal86 13th Jul 17, 8:03 PM
    • 3Posts
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    Missdougal86
    Overpay mortgage or personal loan?
    • #1
    • 13th Jul 17, 8:03 PM
    Overpay mortgage or personal loan? 13th Jul 17 at 8:03 PM
    Hi guys

    This is my first post so please be nice! I am in a position where I can start making overpayments towards my debt. The biggest and the one with the highest interest rate is my mortgage. I also have a personal loan but the interest rate is about 0.5% lower. Usually it would be a no brainer and I'd pay off chunks of the mortgage because I am saving more in interest. However, if for some reason I was looking to get a credit card the thing visible on my credit account is the sum of my personal loan which may make me a less appealing candidate.

    So I open it to fellow money savers. Which do I make overpayments on?

    Thanks for your help!
    Last edited by Missdougal86; 14-07-2017 at 12:15 PM. Reason: Spelling error and I'm pedantic.
Page 1
    • gycraig
    • By gycraig 13th Jul 17, 8:30 PM
    • 390 Posts
    • 276 Thanks
    gycraig
    • #2
    • 13th Jul 17, 8:30 PM
    • #2
    • 13th Jul 17, 8:30 PM
    If it's a long mortgage I'd over pay on the loan so I could have that money spare in a couple of months. Won't feel the benefit of over paying mortgage for years
    • ricky_v
    • By ricky_v 13th Jul 17, 9:07 PM
    • 255 Posts
    • 130 Thanks
    ricky_v
    • #3
    • 13th Jul 17, 9:07 PM
    • #3
    • 13th Jul 17, 9:07 PM
    From a maths point of view you'd be better off overpaying the mortgage as you'll be 1/2p a year better off for every £1 paid back.

    If your mortgage isn't in a fixed period I would look at a remortgage as chances are you'll get a rate lower than the loan rate.
    • PeacefulWaters
    • By PeacefulWaters 14th Jul 17, 7:37 AM
    • 6,987 Posts
    • 8,597 Thanks
    PeacefulWaters
    • #4
    • 14th Jul 17, 7:37 AM
    • #4
    • 14th Jul 17, 7:37 AM
    From a maths point of view you'd be better off overpaying the mortgage as you'll be 1/2p a year better off for every £1 paid back.

    If your mortgage isn't in a fixed period I would look at a remortgage as chances are you'll get a rate lower than the loan rate.
    Originally posted by ricky_v
    The loan is the cheaper rate. So overpaying the mortgage is better use of funds.
    • getmore4less
    • By getmore4less 14th Jul 17, 8:20 AM
    • 30,000 Posts
    • 17,929 Thanks
    getmore4less
    • #5
    • 14th Jul 17, 8:20 AM
    • #5
    • 14th Jul 17, 8:20 AM
    Hi guys

    This is my first post so please be nice! I am in a position where I can start making overpayments towards my debt. The biggest and the one with the highest interest rate is my mortgage. I also have a personal loan but the interest rate is about 0.5% lower. Usually it would be a no brainier and I'd pay off chunks of the mortgage because I am saving more in interest. However, if for some reason I was looking to get a credit card the thing visible on my credit account is the sum of my personal loan which may make me a less appealing candidate.

    So I open it to fellow money savers. Which do I make overpayments on?

    Thanks for your help!
    Originally posted by Missdougal86
    put up a list of all your debts, amount, term, rate, payment?

    why do you need more credit?
    Last edited by getmore4less; 14-07-2017 at 8:23 AM.
    • Missdougal86
    • By Missdougal86 14th Jul 17, 12:11 PM
    • 3 Posts
    • 0 Thanks
    Missdougal86
    • #6
    • 14th Jul 17, 12:11 PM
    • #6
    • 14th Jul 17, 12:11 PM
    Hello,


    Thanks for your comments. At the moment and for the foreseeable future I don't need (or want) more credit. The aim is to get as close to debt free as possible eventually. The mortgage is fixed for another two years so no need to remortgage at the moment.


    Mortgage last year was around £93k over 31 years @ 3.44% (not sure what the figure is at the moment as I won't get the annual statement for a while yet).


    Loan is £20k over 5 years @ 2.9%.
    Last edited by Missdougal86; 14-07-2017 at 12:17 PM.
    • ViolaLass
    • By ViolaLass 14th Jul 17, 1:07 PM
    • 5,036 Posts
    • 6,950 Thanks
    ViolaLass
    • #7
    • 14th Jul 17, 1:07 PM
    • #7
    • 14th Jul 17, 1:07 PM
    If you don't actually need the credit card then there's no reason at all to not overpay the mortgage.
    • Missdougal86
    • By Missdougal86 14th Jul 17, 4:28 PM
    • 3 Posts
    • 0 Thanks
    Missdougal86
    • #8
    • 14th Jul 17, 4:28 PM
    • #8
    • 14th Jul 17, 4:28 PM
    Hello


    Thanks for your comments. There is no need for credit at the moment, but if at some point towards the end of my fixed term mortgage (approx. 2 years' time) I sell my flat to move in with my boyfriend and I get put on his mortgage does it actually look better as a candidate for a joint mortgage if I have less debt i.e. a smaller personal loan.


    Hope that makes sense?
    • engineer amy
    • By engineer amy 14th Jul 17, 4:46 PM
    • 602 Posts
    • 1,105 Thanks
    engineer amy
    • #9
    • 14th Jul 17, 4:46 PM
    • #9
    • 14th Jul 17, 4:46 PM
    I suppose it would depend what order you do things in - if you were to sell your flat and move in with the partner, then apply for the mortgage, you could use whatever equity you have from the sale of your flat to pay off the loan (or part of the loan), thus reducing the debt.
    Mortgage = £113,495 (May 2009) £85559.64 Oct 2016
    Halifax CC 0% = £0!!! Car Loan = £0!!!!!
    PAYDBX16 #106 = 12377/12377 (100%)
    • bris
    • By bris 16th Jul 17, 11:59 PM
    • 6,937 Posts
    • 5,956 Thanks
    bris
    If it's a long mortgage then any overpayment will have a huge affect on the final interest paid. If it's a decent amount then could save you thousands in the long run and finish the mortgage earlier.


    Overpaying a personal loan would save you peanuts in the over all grand scheme of things if it's only for 2-5 years.
    • PeacefulWaters
    • By PeacefulWaters 17th Jul 17, 7:59 AM
    • 6,987 Posts
    • 8,597 Thanks
    PeacefulWaters
    If it's a long mortgage then any overpayment will have a huge affect on the final interest paid. If it's a decent amount then could save you thousands in the long run and finish the mortgage earlier.


    Overpaying a personal loan would save you peanuts in the over all grand scheme of things if it's only for 2-5 years.
    Originally posted by bris
    Although if you overpay the more expensive loan and, when it's repaid then allocate the whole loan payment, including overpayment, to the mortgage you'll be better off overall.
    • ViolaLass
    • By ViolaLass 17th Jul 17, 9:19 AM
    • 5,036 Posts
    • 6,950 Thanks
    ViolaLass
    Although if you overpay the more expensive loan and, when it's repaid then allocate the whole loan payment, including overpayment, to the mortgage you'll be better off overall.
    Originally posted by PeacefulWaters

    No, because the mortgage has the higher rate.
    • PeacefulWaters
    • By PeacefulWaters 17th Jul 17, 10:27 AM
    • 6,987 Posts
    • 8,597 Thanks
    PeacefulWaters
    No, because the mortgage has the higher rate.
    Originally posted by ViolaLass
    Of course it does. I'd even pointed that out myself earlier.

    As you were.
    • Herzlos
    • By Herzlos 17th Jul 17, 2:28 PM
    • 5,794 Posts
    • 5,274 Thanks
    Herzlos
    Mortgage. At 31 years left (presumably 9 years into a 40 year), you're probably paying at least 1.5x interest on your money over the lifetime (i.e. you overpay by £1, you'll save about £1.50 in interest, or are £2.50 closer to paying it off). If you can bring it down enough you may be able to drop down an LTV band and get a better rate on your next renewal, too.


    If you were within about a year of paying off the loan I'd have suggested that first - because then you'll free up the loan payment which you can put onto the mortgage.
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