Overpayment advice

spannerj

Hi there,

I've been looking around for a mortgage calculator for my personal mortage scenario and the best I have found (through a thread on this site) is the Egg calculator.

I have a mortgage in 2 parts. Both fixed at 5.83%.
19 years 4 months left on both.
1st part is all repayment for £68,000
2nd part is £30,000 interest only and £48,800 repayment with no vehicle to repay the interest only at present. (We will be merging it together when we next remortgage.)

I have been overpaying for over a year on the second part of the mortgage. Am I overpaying the right part of the mortage or would I save more by overpaying the 1st part?

The Egg calc shows a saving of 1 year 6 month and £18k as I stand now with a £100 overpayment but 5 years and £13k if I overpay the first part instead.

Now as I read it I save less by overpaying part 1 but I would then have extra time ( at least 3 years and 6 months ) where I could massively overpay part 2.

I'm not convinced by my reasoning so I would appreciate some more informed advice as I am planning on upping my overpayment soon.

Thanks in advance.

Thrugelmir

By overpaying part 1 of your mortgage which is on a repayment basis. You will massively accelerate the reduction in capital thereby reducing interest.

The missing link, is that part 2 is both i/o and repayment. So you are not repaying any capital from the i/o as it stands. Hence less apparent benefit.


Personally I would use the overpayments to reduce the i/o part. As you've no repayment vehicle this will focus your attention in paying it off.

TrickyDicky101

Because the rate of interest charged is the same on both of your mortgages, it makes no economic difference on which you overpay. As Thrugelmir notes, there may be non-economic reasons for choosing one over the other.