Which to overpay

Have a residential mortgage and a btl. Am going to be able to overpay about £300 a month. Not sure which to go for.

Part 1 of residential mortgage - £83,000 at 1.03% above base with a collar of 2% (currently 3.03%) over 25 years

part 2 of residential mortgage - £37,000 at 4.29% fixed over 11 years

or btl mortgage at 6.29% repayment over 25 years.

I am not sure which mortgage or part of mortgage to overpay to make the most savings.

Ideas on a postcard please.
I am a Mortgage Adviser
You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.

Replies

  • JonbvnJonbvn Forumite
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    A rule of thumb is to overpay the highest interest rate debt first. However, since the highest rate is a BTL mortgage, I would guess interest is offset against rental income for tax purposes.

    Given the above, it would likely be better to OP the 4.29% mtg. However, beware of any early repayment charges that usually apply to fixed rate mtgs.
    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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    What is the LTV of the BTL as deals expensive unless you have a good LTV of 75% or less!
  • getmore4lessgetmore4less Forumite
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    On the residential the fixed is the choice.

    part 1 is fixed rate upto 1.5% base rate rise then needs another 1.26% rise to catch up the part 2. so ages before that will happen.

    So then it is between that and the BTL and how much tax you are paying on any surplus income.

    £100 off the 4.29% saves £4.29
    £100 off the 6.29% saves £6.29 (0%tax)
    £100 off the 6.29% saves £5.03 (20%tax)
    £100 off the 6.29% saves £3.77 (40%tax)
  • Hi and thanks for responses

    BTL is 75% LTV. Is fixed for 5 years with post office. The rate is high but the fees were very low and seemed to work out better that way

    Am a 20% tax payer so by your reconing I am better paying of the btl?

    The residential is with me and my fiance, the btl is my previous property so just in my own name. With the residential it is Nationwide where we still have overpayments, underpayments and borrow back. Don't have the flexibility with the btl

    What to do, what to do.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • dimbo61dimbo61 Forumite
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    So do 50/50 on BTL mortgage and residential mortgage and build up funds in the Nationwide overpayment pot ( just in case)
  • greentgreent Forumite
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    dimbo61 wrote: »
    So do 50/50 on BTL mortgage and residential mortgage and build up funds in the Nationwide overpayment pot ( just in case)

    seems a good compromise :)
    I am the master of my fate; I am the captain of my soul
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  • dimbo61dimbo61 Forumite
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    The BTL is a buisness with tax relief on the interest part of the mortgage payment so the bigger the mortgage the relief you can claim but you have to pay the residential mortgage out of earned ( and taxed) income so with the overpayment reserve pot !!! you may well be better off OP your 4.29% fixed part first.
    Just be aware of the LTV on the BTL ( which is fixed for the next 5 years)
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