Which to pay off first?

NuttyBird

I would like to start making small over payments on my mortgage but not sure which to pay first? We have 2 mortgages - one for that has 6 years - we pay £410 on this - the second has 12 years left - we pay £300 on the - they both have the same interest rate.

Which would I be best to over pay? I thought the 6 year ?

Thanks

ValHaller

The one with the highest interest rate first. In your case, either

stylus360

Depend on how much you have left on each mortgage.

NuttyBird

The 6 year has about £28,000 and the 12 has £35,000- the both have the same interest rate.

ValHaller

stylus360 wrote: »

Depend on how much you have left on each mortgage.

Irrelevant? Or explain.

gazter

From a practical point of view, if they are both the same rate, over pay the one with the longer term left, you might end up with both mortgages finishing at the same time....

brit1234

gazter wrote: »

From a practical point of view, if they are both the same rate, over pay the one with the longer term left, you might end up with both mortgages finishing at the same time....

I agree and mortgage rates for the longest term one may be higher when you have paid the short term one off.

dimbo61

Check that you will not pay any Early Repayment Charges by overpaying !
If you are in a fixed rate period many lenders still allow upto 10% overpayments each year but read the T&C,s or give the lenders mortgage centre a call on monday.
Overpay as much as you can to be Mortgage Free ASAP

ValHaller

brit1234 wrote: »

I agree and mortgage rates for the longest term one may be higher when you have paid the short term one off.

Assuming both mortgages are on the same terms, if the longer term one is paid off first, the rates for the shorter term mortgage could be higher. There really is no difference on this

James_N

brit1234 wrote: »

I agree and mortgage rates for the longest term one may be higher when you have paid the short term one off.

Hi Brit - please, if you want to give the appearance of knowing even a little about what you say, you might update your sig to be accurate. Actually, thinking about it, how do you know ANYTHING about mortgages - you don't have one, and I think have never had one. So exactly how are you able to give others the benefit of your considerable experience and knowledge (not).

Imma_Number

I've cranked some numbers based on another thread of yours and this one. I couldn't reconcile 3.69%, 28K & 6 years (72months) with a payment of £410pcm. I got £434. The 35K one over 12 years (144months) was closer @301pcm.

All the following assumes that the interest rate stays the same and that the regular mortgage payments also stay the same despite any over-payments. Also when the 28K mortgage is paid off, that £410pcm goes as additional overpayment on the 36K one.

Also ditto above posts re ERCs, T&Cs and other overpaying limitations

Anyway, going with what I have there wasn't much difference between paying off the 28K mortgage first and the 36K mortgage first in terms of pure return.

Paying the 36K mortgage first ended up with both cleared barely 1month sooner than paying the 28K one first.

However I'd suggest paying the 28K one first because frees up a whole chunk of outgoings sooner and so gives more flexibility.
* Over-paying by £50 pcm reduces the term of the 28K one by ~9months.
* Over-paying by £100 pcm reduces the term of the 28K mortgage by ~14months.

You can then use the £410 freed up by paying off the 28K mortgage early to either overpay on the 36K mortgage or fund something else that may have cropped up 5 years down the line.

Hope this helps.
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