Overpaying mortgage vs paying off loan

CarineG

Dear all,

I'm coming to the end of the fixed rate on my mortgage and therefore moving on to the base mortgage rate which will save me £200 a month.
I have also 5 years left on a loan of £280 a month.

I can either put the £200 a month towards overpaying my mortgage or put the money aside and re-pay the loan early.
My mortgage will be at 2.50% next month and my loan is 8.1%.

I am not sure what is my best option. I was going to re-pay the loan first since it has the highest interest rate however I would like to move home and therefore need to have as much equity as possible. My flat is now valued at what I paid for it 2 years ago.

Some thoughts would be much appreciated.

Thrugelmir

Your loan will carry a redemption penalty. So thats one thing to consider.

Interest rates will rise in the future so your personal loan may not be so expensive in the years to come.

Overpaying £200 a month will make an immediate impact on reducing the capital balance of your mortgage.

CarineG

I will check the early redemption penalty, it would still be less than paying all the interests.
Thanks

Euphoria1z

im in a similar position to you, and for me, paying of my personal loans is a priority, so im now putting extra money that im saving to one side so i can pay off my loans quicker as the interest is failry high.