overpay mortgage or clear secured loan???? help

helpmeout_3

Hi All

Just in a bit of a dilemma at the moment and dont know which way to go: wonder if some kind person can help:

I will start and try to be as brief as poss!!

I currently have the following outgoings:

Mortgage : £122000 remaining C+I = £734.00 per month
for just under 23yrs
Secured loan : £28300 remaining = £458.31 per month for another 9yrs

I currently have £30000 which i am looking to either pay of secured loan completley or reduce my mortgage amount.

To pay off the secured i have been advised that it would cost 6mths int payments plus £100 = £2000

Where as if i pay towards my mortgage ( i am currently on SVR at moment) i would reduce this to £92000.

What would be better????

I am stumped.

MountainMan101

You should do the full calculations for

(a) Total amount paid over the life of the two loans (with and without using 30k)
(b)Reduction in month outgoings if you pay off Mortgage or Loan

Then, if things are tight now go for the option that gives you the most monthly gain. If things aren't tight go for the option that gives you the best overall saving.

As a quick calculation, I doubt 30k off your mortgage will drop you monthly payments by £458.31 so the answer to (b) is probably the loan.

The answer to (a) depends on your interest rates for the two loans. But is probably mortgage.

dimbo61

Read your post and confused 6 months payments on the loan £458.31x6= £2749.86 + £100 = £2849.86 not £ 2000
I would be inclined to pay off the secured loan as you cant remortgage to anyone else until that loan is cleared.
You dont talk/write what the interest rate is on either the loan or the mortgage.
If you did pay off this secured loan even with the 6 months penalty you would then have £458.31 extra each month to overpay the mortgage (IF ALLOWED ! ) or put into savings.
JUST MY OPINION

helpmeout_3

sorry!

To pay of secured it is 6 x montly interest payment (£314) + £100 = £1984


interest on the loan is 14.1%

current SVR on mortgage 4.45%

sorry for confusion

Eyesparky

Personally I would pay off the loan and remove the second charge on the property, then overpay the principle mortgage with some/all of the money that was going towards the loan each month (depending on how tight my monthly budget was and how much spare money I had put aside for emergencies). As pointed out above, this would also allow you to potentially remortgage more easily should an attractive deal present itself in the future. Either way, it is still a nice dilemma to have and using the money to pay down either debt is a positive move.

trixietoes

I too would pay off the loan, it would free up 450 ish a month that you can then save or over pay like a previous poster suggested. It will give you more freedom to choose what to do with your money. Paying 30k off your mortgage won't reduce the payments by 450.00 a month

bacardi.

helpmeout wrote: »

interest on the loan is 14.1%

current SVR on mortgage 4.45%

i think you could answer your own question with a post like that, 14.1% :eek: Pay the loan and then overpay on the mortgage (even a small amount can make alot if difference

cheers

dimbo61

Paying off the loan and then overpaying the mortgage by the £458.31 would knock 12/13 years off your mortgage and save you about £50,000 in interest I know thats what I am doing myself.
Fancy being mortgage free in 10 years and save £50,000 pounds !!!!