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Mortgage question - which balance to overpay??

Vicki_Y
Vicki_Y Posts: 21 Forumite
Part of the Furniture Combo Breaker
in Mortgages & endowments
Apologies if this seems like a stupid question to some, but I have the following two mortgages:

1. 3.99% fixed until Feb 2012, currently £100,427.00
2. Variable (currently 4.99%), currently £9,650.00

I will soon be overpaying my mortgage each month, even if its only by a small amount.

My question is, which of the two balances above should I overpay on? Would it be the first one as it is a larger balance, or the second one as I'm paying a higher interest rate? :)

Many thanks for any advice you can give.

Vicki Y

Comments

  • CLAPTON
    CLAPTON Posts: 41,865 Forumite
    10,000 Posts Combo Breaker
    in general, all other things being equal then overpay the debt with the highest APR; that way you pay the least interest
  • Ximian
    Ximian Posts: 711 Forumite
    Part of the Furniture 500 Posts Combo Breaker
    edited 14 June 2011 at 9:13AM
    I agree with CLAPTON. It also depends if there are any penalties for overpayment, maybe one mortgage has a penalty for overpayments and the other one doesn't. It also depends on the term of the mortgage, even though one might have a lower % rate but longer term it might work out more over a longer term than the mortgage with the higher % rate over a shorter term. Even though the second mortgage you have listed above is for a much smaller amount and will obviously cost less that the larger mortgage, it's still worth considering the long term cost when looking at mortgages/debt.
    This calculator might help to do some comparisons as well as look at the long term cost: http://www.whatsthecost.com/mortgage.aspx
  • TrickyDicky101
    TrickyDicky101 Posts: 3,535 Forumite
    Part of the Furniture 1,000 Posts
    Ximian wrote: »
    It also depends on the term of the mortgage,

    No, it doesn't.
  • kingstreet
    kingstreet Posts: 39,439 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    I take it these are two sub-accounts of the same mortgage, not two mortgages on different properties?

    Were either of these sums used to raise money for a buy to let?
    I am a mortgage broker. 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. Please do not send PMs asking for one-to-one-advice, or representation.
  • getmore4less
    getmore4less Posts: 46,882 Forumite
    Part of the Furniture 10,000 Posts Name Dropper I've helped Parliament
    three things you need to look at

    Follow on rate for the fix

    Max overpayment on the fix

    Total amount of overpayments before the fix comes out of penalties.
  • Ximian
    Ximian Posts: 711 Forumite
    Part of the Furniture 500 Posts Combo Breaker
    TrickyDicky101 wrote: »
    No, it doesn't.

    In this case maybe not, in other cases it does matter.
  • getmore4less
    getmore4less Posts: 46,882 Forumite
    Part of the Furniture 10,000 Posts Name Dropper I've helped Parliament
    Ximian wrote: »
    In this case maybe not, in other cases it does matter.

    Extreamly rare that differnt term on mortgage components would make a difference to the efficiency of using overpayments.
  • TrickyDicky101
    TrickyDicky101 Posts: 3,535 Forumite
    Part of the Furniture 1,000 Posts
    Ximian wrote: »
    In this case maybe not, in other cases it does matter.

    Really? Maybe you could provide a few examples where exclusively the term makes any difference? Thanks.
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