Pay Off Interest Only or Repayment Part Of Mortgage First?

M271

Currently I have a part Interest only and part repayment mortgage roughly £60,000 and £50,000 respectively, I'm overpaying each month by about 50% (£1200 to £800) on a Tracker Mortgage that has currently a 2% interest rate (0.1% over base rate but minimum of 2%). There is about 4 years to run on the mortgage with the monthly overpayments.
I have 3 endowments maturing in the next 6 months that should pay off part of the Interest Only part (this is what they were originally taken out to pay off) with current projections at £51,000 leaving £9,000 to pay off.

My question is that I will pay off all parts of the mortgage in the end but will I pay less in total in the next 4 years for the remaining term of the mortgage if I now use the endowments to pay off either some of the Interest Only or the Repayment part of the mortgage.

hillcats

Surely you would be better of clearing the outstanding capital of the part that is interest only, to minimise the actual amount of interest being paid, (on the o/s capital) then make a start on the repayment part of the mortgage...?

TrickyDicky101

What's the rate on the interest only mortgage? I take it you don't currently overpay on this? I would consider doing so depending on if it has a higher rate than the repayment mortgage.

M271

TrickyDicky101 wrote: »

What's the rate on the interest only mortgage? I take it you don't currently overpay on this? I would consider doing so depending on if it has a higher rate than the repayment mortgage.

Both parts of the mortgage are at 2% interest rate, the overpayment is also on both parts although in proportion to the normal monthly payment i.e. on my 2009 statement when overpayment was not so much as now the Interest Only overpayment was £26.60 over the normal £99.87 payment, and the Repayment was £183.70 over the normal £689.83.

CLAPTON

if the interest rate is the same for both parts of the mortgage and there are no charges for overpaying on either part then it will make no financial difference which you overpay
i'm a little unclear what happens after tthe 4 years

M271

CLAPTON wrote: »

if the interest rate is the same for both parts of the mortgage and there are no charges for overpaying on either part then it will make no financial difference which you overpay
i'm a little unclear what happens after tthe 4 years

With my overpayments the total mortgage will be repaid in about 4 years time.

TrickyDicky101

If they're both at the same rate then it won't make any difference which you overpay first if your total repayments remain the same (under either scenario).

M271

TrickyDicky101 wrote: »

If they're both at the same rate then it won't make any difference which you overpay first if your total repayments remain the same (under either scenario).

The more I think about it the more I think the same as you that it makes no difference.

At first it felt like I should target any lump sum repayments (endowments, surplus funds etc..) at the Repayment part because I pay more per month for this part of my mortgage, but of course this means that less of the £60,000 amount on which the Interest Only amount is based is paid off (as the endowment funds have been diverted to the repayment part) and this needs to be paid off at some point with other funds.