Help clear loan or mortgage

paddyz

Hi all,

Could you please advise me is it best to pay off a loan early or put our money into the mortgag? paying approx 3k loan will save £450 interest, but putting money into the mortgage currently 103k as overpayment could save much more in the long run i think!
(not sure of exact amount though)

loan is 16% and mortgage is 5.19% my common sense is saying pay loan off first, any good advice will be very appreciated.

:A

Tina

jonesMUFCforever

If you repay the personal loan (high rate) then will you not have some money over every month to overpay the mortgage (low rate)?

paddyz

Hi Jones

Thanks for replying, like yourself thats my thoughts too, husbands got the big idea of paying as much off the mortgage as we can which i can understant too tbh.

We have added up the sums, we could pay off the loan currently £200 a month so that would save us an extra 1,600 this year to add to the one off mortgage overpayment in sept, so amount will be lower for the mortgage if we pay loan off first, hmmm decisions decisions

Tina.

paddyrg

Pay off the highest interest loan first - in this case the loan - then you will have more freed up cash to put against the next highest interest loan (or mortgage). It's the cheapest way.

lionelator

By far cheaper in the long run to pay off the higher interest loan first.

[Deleted User]

5.19% is quite high for a mortgage do you have enough equity to find a better deal?

swiliaWaF

awesome. nice man.

magpiecottage

As a general rule, paying off the highest interest loan first, then directing the income freed up by clearing it to the other one will be cheaper.

However, you need to check there are no penalties for repaying early on the more expensive one first.

aleabby

Great discussion. I am getting help too.

anirow

Yes completely agree it is always better to pay the high interest loan first. it also helps to build a high credit rating.

paddyz

Thanks all

Loan if paid off early it has roughly a months interest added to it,
The mortgage is fixed and will not be able to change untill sept 12 so kinda stuck till then as cost for changing is very high, just really keen to make sure we are doing the right thing by putting money in the right place, all advice has been great

will pay off loan:A

Tina