Which Mortgage to Pay off First

kamaran

Hi Guys,

Hopefully you can answer this question, it will save me going into the loft to find my old statements, I have 2 flexible tracker mortgages:

65K @ 1.64% over BOE B.R.
140K @ .99% over BOE B.R.

I currently have about £300 extra cash a month. Should I use these funds to overpay on the more expensive 65K mortgage first or will it make little difference if I split the funds evenly?

Can anyone calculate the difference between the 2 options or tell me a quick way to do so myself?

Thanks,
Kamaran

ginvzt

Go here and play with numbers:

http://www.moneysavingexpert.com/mortgages/mortgage-calculator

You also don't say what term is the mortgage - are they both running for the same time?

kamaran

ginvzt wrote: »

Go here and play with numbers:

http://www.moneysavingexpert.com/mortgages/mortgage-calculator

You also don't say what term is the mortgage - are they both running for the same time?

Yes both have about 20 years left.

<sebb>

are you renting one/both of these houses?

kamaran

<sebb> wrote: »

are you renting one/both of these houses?

Yes, the one with the higher mortgage. Why is that relevant?

taka

Have you though about putting your £300/month into a savings account instead? It may be better to save rather than overpay - depends on your tax bracket though! Are there any savings accounts that give you (net) a higher interest rate than your mortgage?

kamaran

taka wrote: »

Have you though about putting your £300/month into a savings account instead? It may be better to save rather than overpay - depends on your tax bracket though! Are there any savings accounts that give you (net) a higher interest rate than your mortgage?

Unfortunately not, I'm a higher rate tax payer.

Trying_to_be_good

Have you used your ISA allowance? The top cash ISAs would beat the rate you're paying.

For tax reasons, it's better to pay off the mortgage on you home (i.e. the one you're NOT renting out) as the mortgage interest on the other is tax deductible against the rent received. In fact, it might be worth that moptgage being interest only, and paying excess (after cash ISA contributions) off the 'home' mortgage, if you haven't already.

getmore4less

Trying_to_be_good wrote: »

Have you used your ISA allowance? The top cash ISAs would beat the rate you're paying.

For tax reasons, it's better to pay off the mortgage on you home (i.e. the one you're NOT renting out) as the mortgage interest on the other is tax deductible against the rent received. In fact, it might be worth that moptgage being interest only, and paying excess (after cash ISA contributions) off the 'home' mortgage, if you haven't already.

It is posible to get debt interest tax relief on borrowing upto the value when first let, the borrowings do not have to be secured on the property that is let.



Anyway the highest rate is 2.14% so that needs savings over 3.57% with HRT.
ISA aside, currently one regular saver that can do that for £300pm but does have risks if rates rise.
http://www.moneysavingexpert.com/savings/best-regular-savings-accounts

getmore4less

kamaran wrote: »

Yes, the one with the higher mortgage. Why is that relevant?

If you are renting out a house you should already understand the tax implications and the need to declare the rent as income