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What to pay off first?


I am looking from next month to make overpayments of £250 per month. :o

I was going to do overpayments of my loan, however I am now tempted to target the mortgage as although this is at a slightly lower rate at 4.99%, there is still 28 years to go and therefore over the lifetime of the mortgage I will save more interest! Plus I can hopefully after some time reach the next level down re mortgage deals!

Wish me luck!!!

Target overpayments for 2012 = £2250 (Apr-Dec) :j


  • Sepa74Sepa74 Forumite
    962 Posts

    Although the mortgage is longer so you will pay more interest over the lifetime of the debt, the fact that once you pay off the debt you can use the payments to then OP on your mortgage means that paying off the higher interest loan first is actually the way to reduce overall interest payments and maximise your wealth. This is called snowballing your debt.

    If there are significant repayment penalties on your other debt that may change the calculation, but generally it holds true.

    So why don't you join us, and start a diary, but make a little detour and pay off the other debt first and then the money you would pay to the other debt can go to pay off your mortgage and you'll be amazed at how quickly you start feeling much wealthier!
    Borrowed £150,000 in an offset tracker mortgage in May 2007 - MFD May 2041 (67)

    Jan 2012 - £125,620.02 / 2,913.87 / Nov 2032 (58) :beer:
    Apr 2012 - £122,901.88 / 3,170.91 / Jul 2032 (58)
    Jul 2012 - £122, 589.02 / 3,507.99 / Sept 2032 (58)
    Oct 2012 - £120,476.31 / 3,889.42 / July 2032 (58)
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