Which mortgage to overpay?

qprfan

I have recently inherited £20k which I would like to put against my mortgage.

The problem is that I have 3 mortgages with my current lender (Nationwide) due to 3 house moves.

My question is which mortgage am I best putting the money towards?

Mortgage 1 : £108,000 at 2.5% (not fixed can overpay as much as I want)
Mortgage 2: £64,000 at 5.98% (fixed until 30/09/12 then goes to standard mortgage rate currently 3.99%)
Mortgage 3: £26,000 at 3.99% (fixed until 31/12/12 then goes to standard mortgage rate currently 3.99%)

I'm assuming its best to put the money against Mortgage 1 whilst the rate is so low or am I better off overpaying Mortgage 2 which I can do by £500 per month until the "fixed" expires.

Can anyone help.

getmore4less

If drip feeding overpay the highest No 2.

What are the penalty charges for going over £500pm?

qprfan

Early repayment charge is 3% on any outstanding balance (For mortgage 2 & 3)

Early repayment charge is not applicable for Mortgage 1.

getmore4less

If you are going to pay the penalty pay it on 2

It saves the most.
If rates rise 2 become more expensive thatn 3 in sept 12

Its probably not worth paying the penalty though.

You save around 4% over 14 month with a 3% penalty

If you can find a good savings account there is not much in it and having access to some savings is worth while.

dimbo61

I would overpay the 2nd part and 3rd parts of the mortgage by the £500pm allowed ( each) and put £5340 into a cash ISA paying over 3% tax free. 2X £5340 if Other half!!
Overpay the expensive parts of your mortgage until you have used up the £20K

Evilm

I'd personally overpay 2 & 3 by £500 a month if thats allowed.

getmore4less

Is it 3 mortgages with £500 overpayments on each or one mortgage with three differernt parts so only £500 in total

qprfan

Thank you for all your responses.

Mortgage 1 is out of its fixed term and so I can overpay as much as I want whenever I want. Mortgage 2 & 3 I can overpay by £500 per month each during their fixed terms.

MFW_10YRS_4

Given that both of the higher rate mortgages end next year and both have redemption penalties in place, I would pay the £20k onto mortgage 1 and look to remortgage them all onto a single product in Dec 2012. In the meantime if you could continue to overpay out of any disposible income between now and then, I would overpay mortgage 2 as much as you can.

getmore4less

MFW_10YRS wrote: »

Given that both of the higher rate mortgages end next year and both have redemption penalties in place, I would pay the £20k onto mortgage 1 and look to remortgage them all onto a single product in Dec 2012. In the meantime if you could continue to overpay out of any disposible income between now and then, I would overpay mortgage 2 as much as you can.

That 2.5% tracker will be hard to beat.


Since both the 2 and 3 have £500 overpayment limits, £500 on each and then whats left to 2 when the penaties stop is probably the best overall.

TrickyDicky101

If the terms on (1) are the same as on my NW mortgage, then OP can overpay £19k against (1) and £500 each against (2) and (3). Next calendar month, he can instruct withdrawal of £1k against (1)'s overpayment reserve and then pay off £500 again against (2) and (3). He can do this for the next 15 months (ie until the fixed terms are up). This would maximise his economic retrun (although is more fiddly and depends on timings of receipts/payments.