Which mortgage should we overpay on?

madmish00

I'm usually pretty good with numbers but my head doesn't seem to be working at all today!

We are moving house soon and will be porting our current £81,000 mortgage which is on a lifetime tracker at 0.18% above base rate with a 2% floor so we are currently paying 2.18% (we are still tied in until November)

We will be borrowing an additional £50,000 for which we are looking at a 2 year fix at 3.59% (As we have to take extra from same provider if we want to port and not pay early repayment charges on other amount)

We expect to be able to overpay in the region of £150-200 per month while interest rates remain low but I can't work out whether it will be better to pay this off the fixed rate which obviously charges a higher rate or off the tracker which we owe more on... or would it be better to pay £75-100 off each?

The other consideration is that the terms of the tracker allow overpayments to be borrowed back whereas this is not available on the fixed.

We will probably be looking towards remortgaging the full amount after the fixed ends (as I expect the tracker will be a lot more expensive by then)

I don't entirely trust the bank to advise me on the best way to save money as they will be losing out on the interest! Any suggestions/calculations would be really helpful

Thanks

laurel7172

Which mortgage CAN you overpay on? Are there any penalties for overpayment on either or both?

madmish00

Either can have overpayments of up to £500 per month without penalty

madmish00

Also, alternatively I have just noticed that they have released new products since I checked (and we have not reserved yet) and they currently have a 5 year fix at 4.69% which seems like a pretty good rate to me. Looking longer term I can't decide whether this would be a better option... don't want to fall off a two year fixed just as the rates have rocketed back up!

Still don't know which is better to pay overpayments on though!

hastie

look, its as judgement call. Personally I cannot see the benefit in getting rid of such a great tracker. Keep it running. Pay off the highest interest figure. I suspect that you have one of the truly decent tracker rates that used to be out there.
Speaking as someone with a decent tracker rate, I will not be changing it for a fixed

Good luck