Mortgage overpayments, advice needed...

DocHants

We have 2.5 yrs left on our current deal, which was fixed at 5.79 for 5 years with Northern Rock..

We had a 125% mortgage with them:

£114000 for the property (95%)
£30000 loan (30%)

We were with them for 2 years before getting the above deal, and since the house was revalued 2 years ago, the amount we owe is approx (according to our most recent statement):

£126000 for the property
£13000 on the loan

Our monthly payments are £915, and we are looking to start overpaying by £400 - £500 per month for the remainder of this deal.

I would like to know am I best to pay off the £13000 loan, or chip away at the capital... ?? I dont know which would stand us in better stead when we come to the end of our deal...

Trying_to_be_good

The amount you owe on the property seems to have gone up, and the loan value decreased substantially? Or are the first set of numbers when you first bought the property, and then you went onto the 5.79% fix two years later?

I'm assuming the loan is secured on your property, so you won't be able to remortgage to another lender whilst the loan is outstanding, so if there aren't huge penalties, this would be the first thing to pay off.

But you'll also likely need an LTV of 90% to remortgage, so you'll need to know roughly what you value is, and work out how much you'll need to pay off to get to that magic number.

If you can't afford to do both, it's unlikely you'll be able to remortgage (in the current climate) - but keep plugging away at it, anything you overpay will make a difference.

dimbo61

If allowed then overpay the loan ( which is more than likely on a higher rate than the mortgage )
£500 a month would have it cleared in 2 years and then overpay on the main mortgage.
HOPEFULLY the housing market will have recovered in 2.5 years
You will not get a savings rate of 5.75% so pay any spare money off the loan and mortgage GOOD LUCK

shop-to-drop

I am by no means an expert but I would think better to pay the loan first. If you were made redundant etc you would only get help with the interest on the mortgage and not the loan for instance.

DocHants

The amount you owe on the property seems to have gone up, and the loan value decreased substantially? Or are the first set of numbers when you first bought the property, and then you went onto the 5.79% fix two years later?

Thats because when I remorgaged with NR after my initial 2 years, the house was valued higher than when I first got the mortgage.. so in effect, the actual loan needed was less... we could borrow more against the increased value of the property, and therefore lower the loan...

The loan is actually unsecured, at the same rate as the mortgage.. although I believe if we were to effectively split them up, the interest rate onthe loan would rocket.. I checked this a year or 2 ago.. You only get the good loan rate whilst you have the mortgage, part of the "Together" package NR was offering...

With this in mind, Im probably better off concentrating on paying off the loan part of the mortgage, which would make things easier when our fixed term runs out...