Make mortgage over payments, or clear car finance?

boltneck123

Hi all,

Frequent forum reader, occasional poster .

Currently me and my Brother are in the process of buying a house together, we are at the solicitors starting their thing stage and there is no chain, things are looking good and our mortgage provider is confident about us .

Now once we have moved in, I will be putting a budget in place that more than pays the mortgage payment and house hold bills with some to spare. Our personal spending will come out of what is left of our wages, food, presents, car insurance, toiletries etc etc.

Now my initial plan with the spare cash from the monthly budget was to put 80% of it out the way into a decent ISA, this is roughly £120 (this will build for a year to 18 months and be used for a over payment and to start house maintenance). Then leave the rest at hand for emergencies or if one month either me or my Brother are short due to illness or something.

Currently we both have a car on finance each that we purchased in January, they cost about 5.5k each and are on finance for 5 years at around 11% APR. Monthly payment each around the £120 mark.

The mortgage will be 67k borrowed at 5.69% fixed for 5 years, after that variable rate of 6.14% but this could either be higher or fingers crossed lower. Obviously I will remortgage and if I think I need to fix for another 5 years at hopefully a lower rate.

My thoughts are that if I don't get the LTV down to 85% by using over payments over the next 5 years when I come to remortgage I am not going to be able to get a really good rate. By this point, the cars will have been paid for so this leaves an extra £200ish a month to actually increase payments.

There are pros and cons, obviously clearing the car loans has advantages less interest paid, cars owned, more money spare. But, pay down more of the mortgage and make home improvements lowers LTV and increases property value for a good place for the remortgage. The house is livable but needs some dragging into the future, it does not have a working kitchen. So a new kitchen would do wonders.

Advice, ideas? I cant decide what route to take.

Thanks,

Ben.

InsertWittyName

Pay off the car loan.

Is there a specific reason your mortgage APR (and SVR) is so high?

boltneck123

It was the lowest mortgage out of two we could apply for. With a 5% deposit.

I have pondered this more and done more math. Paying the car loans I think should be priority. I just want my LTV be as low as I can get it in 5 years. But I guess I can make bigger over payments for the last 2/3 years is my fixed term with spare cash that would otherwise go on the cars.

Thanks.

Ben