£7k available to pay off mortgage or loan

Bernard

Hello all,

I have a mortgage of around £215K, which is going to last 30 years.The first 15 years are fixed at 5.19%. I have a personal loan of around £7k, which costs me £125 a month. I have inherited 7K and would like to know should I pay it off the motrgage balance or completely pay off the Loan. If I paid off the loan I'd put the £125 month previously paid on the loan towards the mortgage.

Any mathemagicians out there that can advise?

Thanks for your time.

Bernard

red_flump

Hi, you don't say what the loan term or interest rate is. Assuming it is higher than your mortgage rate I would pay it off and overpay the mortgage.
It is worth getting a settlement figure for the loan just to make sure there are no surprises.

red

Bernard

Hi,

More details on loan as requested:

The loan interest rate is 5.9% and has a settlement figure of £7k (just under infact). The loan has 6 years 3 months left on it.

Bernard

ailuro2

75 months at £125 per month is £9375 total to pay., note the higher 5.9% rate of interest.

If you then go to the coop's mortgage calculator, (as that lets you put in monthly overpayment for a period of time that you choose rather than the full term), then the figure it gives for interest saved if you were to overpay £125 a month for only those 6yrs 3 months is £17693


£8318 difference in your favour if you pay off the loan first-it equates to 1.1years early pay-off.:eek: huge difference.

Bernard

Many thanks ailuro2 you have provided me with specific answer I was looking for. I like the coop calculator you suggested.

Thanks again.

Bernard