Interest only repayments

Chessington_Saint

Hi,
I've a interest only mortgage but trying to pay off a bit of the capital each month. The interest only mortgage is in two parts and I wanted to see if I could get the benefit of the money saving expert forum to tell me which part I should be paying off! This is a selfish request but I hope someone out there can help anyway!

One part has a balance of £84k with an interest rate of 3.99%. The other part is a balance of £149k with an interest rate of 2.50%. While meeting the basic mortgage payments for each, I've been trying every few months to overpay but doing so only on the latter account....is this the right thing to be doing?

Or should I be trying to overpay on the account with the smaller balance (with the higher interest rate??)

This is a shameless call for advice and rather highlights my (financial) illiteracy and lack of numeracy but I welcome your (constructive!) views. Thank you.

kingstreet

Repay the balance on the highest rated sub-account faster.

Chessington_Saint

Thanks Kingstreet. So it makes more sense to pay off the £84k balance with an interest rate of 3.99% then? Thanks again for your speedy reply.

TrickyDicky101

A reason why it might be better to pay down the other debt would be if the T&Cs between each differed and you could, for example, access the overpaid money in one but not the other.

This is the position I find myself in with Nationwide - the lower rate balance comes with the useful ability to borrow back any overpayments I make on the mortgage. The more expensive rate part has no such allowance. Hence, I have been choosing to overpay the lower rate balance in case I should need access to the overpaid funds.

I won't continue this indefinitely - just until I have a sufficient 'rainy day' reserve.

Chessington_Saint

Thanks 'TrickyDicky101'. Yes, that's a good point. I'm with Nationwide too. I need to double-check my T&Cs on the higher rate one as, like you, I can access the overpaid funds on my lower-rate balance.

Yorkie1

Don't assume you will either automatically, or at all, be able to drawdown overpayment funds. Some lenders treat this as a discretionary situation for them, and I believe a lender may have recently changed their T&Cs to prevent drawdown.