Mortgage free - what debts to pay first?

edited 29 August 2009 at 10:01AM in Mortgage-Free Wannabe
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jasonh_2jasonh_2 Forumite
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edited 29 August 2009 at 10:01AM in Mortgage-Free Wannabe
Hi all im just looking for some advice i have a mortgage balance of 65,000k this was 75,000k on a 5 year fixed rate @ 5.69% this is due to finish in Nov 09 and we will automatically go onto the banks standard variable rate which is 1% above the BOE base rate. I currently make overpayments of 100 pounds which was the maximum allowable overpayment without incurring intrest. So when we move to the variable rate we can make as much overpayments as we like im just not sure whats the best way forward for me as i have a credit card bill of 1000k and also a loan of 2800k. Any advice gratefully recieved.
Thanks
Jason

Mortgage payment 570
Loan 275 (10 months)

I have 150 monthly to use to put towards these payments plus the money from my mortgage when the rate decreases in nov, i would like to use this 150 and the loan amount of 275 on top of my payment of 570 to overpay my mortgage should i over pay the loan first? or will the mortgage rate increase making my overpayment less affective so should i concentrate on the mortgage?

Replies

  • dimbo61dimbo61 Forumite
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    You should pay which ever has the highest interest rate at the time!
    If your mortgage is only 1.5% and the loan is 7/8/9% and the credit card 15/16% then clear the credit card first then the loan and then build up some savings ( emergency fund of 3/6 months of income into ISA,s or regular savers)
    Once you have done this then throw every penny into overpaying the mortgage and try not to take out loans or use the credit card ( unless you can clear the full balance each month from savings!)
    GOOD LUCK
  • JonbvnJonbvn Forumite
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    dimbo61 wrote: »
    You should pay which ever has the highest interest rate at the time!

    If your mortgage is only 1.5% and the loan is 7/8/9% and the credit card 15/16% then clear the credit card first then the loan and then build up some savings ( emergency fund of 3/6 months of income into ISA,s or regular savers)

    I entirely agree with the above.

    dimbo61 wrote: »
    Once you have done this then throw every penny into overpaying the mortgage....

    The above is poor money saving advice. Given a mtg interest rate of only 1.5% it would be much better to continue saving, especially since the ISA allowance is increasing to 5.1k next year.
    In case you hadn't already worked it out - the entire global financial system is predicated on the assumption that you're an idiot:cool:
  • dimbo61dimbo61 Forumite
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    OK SORRY JONBVN
    I should have said fill a cash ISA each year IF it will give you a better rate of interest than you are paying on your mortgage.
    You still need to clear the other debts first as a mortgage is USUALLY ! the cheapest form of debt.
    Good Luck on the MF journey
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