woolwich lifetime tracker - best overpayment

airbiscuits

Hi, any advice please!
I currently have 2 woolwich lifetime trackers, as of Sep 2008 ;
79k @ +0.19% BBBR &
18k @ +1.17% BBBR
The reason for the 2 rates and amounts, is that they were started at different times (79k house, 1yr later = 18k extension).
Both running together for a term of 18 years.
I want to overpay, but which would i be better off overpaying? the lower one or the higher value one? - or does it not matter! ( if the overpayments are not affected by interest rates?) -

Thanks
Dave

getmore4less

Overpay the higher interest rate.

m_13

The key thing to work out is which overpayment do you save most on in terms of future interest.

Using Karl Jeacle's fantastic mortgage calculator you can calculate the advantage of a regular or one-off mortgage overpayment.

Based on the information you have provided (and based on interest rates staying exactly as they are today):

If you overpay £100 per month from March 2009 on the £18k debt at 2.17% then that tracker will end in January 2017, 9 years 7 months early and you will have saved £2007.16 in interest that you would have paid otherwise.

If you overpay £200 per month from March 2009 on the £18k debt at 2.17% then that tracker will end in April 2014, 12 years and 4 months early and you will have saved £2,571.74 in interest that you would have paid otherwise.

If you overpay £100 per month from March 2009 on the £79k at 1.19% then that tracker will end in December 2023, 2 years and 8 months early and you will have saved £1,682.78 in interest that you would have paid otherwise.

If you overpay £200 per month from March 2009 on the £79k at 1.19% then that tracker will end in May 2021, 5 years and 3 months early and you will have saved £2,955.10 in interest that you have paid otherwise. However, this is only higher than overpaying on the other loan because the mortgage term is longer.

If you can afford to overpay more on the £18k debt - £250 per month for example - then it would be paid off in June 2013, 13 years and 2 months early saving £2,725.29 in interest you would have otherwise paid. You can then switch your overpayments to the lower interest mortgage.

Check out the terms and conditions on your trackers. Ours (also from Woolwich) has a limit of 10% per annum overpayment in the first three years or you incur early repayment charges. On ours they are 1% of the loan value which would be £180 on the £18k loan which is nothing compared to the interest you would save. However, if you wanted to keep it below the 10% each year then you could do so and switch the remainder of your overpayment to the larger loan.