Which mortgage to overpay?

millysg1

Hello All,
Im trying to reduce my mortgage and my OH and I have decided to use the
dividends he gets paid from his business to overpay our mortgage. He usually
takes out a lump sum of around £4000 every 3 or 4 months

We have two mortgages on our house as we ported one over to our new home and
took out a second one to up our mortgage value. What im trying to work out is
what calculation should I use each time to know which one to pay my lump sum
into?

Originally, I planned to see which one I was paying the most interest (in £
not %) and pay into that account. For example only: this month for one I paid
£150 interest and another £157 and I thought to pay my lump sum into the one I
paid £157 interest t reduce it for next month.

BUT, today I used Martin's overpayment calculator to see how much I would
save in interest and the £150 one wins out over the £157 one. This is because it
is a higher interest rate (but lower mortgage value)

Which calculation do you think is best to use when deciding which account to
dump my lump sum into that month? Martin's Calculator or monthly interest
payments?
Or am I looking at this completely wrong!!!!!

To give you an idea,
Mortgage one £85,681 left with 2.19% tracker (20.5 years left) (paid £158
interest last month)
Mortgage two £66,933 left with 2.69% tracker (20.5 years left) (paid £150
interest last month)

If I pay £4000 next month into mortgage one I save about £2,100 in interest
on mortgage term.
OR, pay £4000 next month into mortgage two and I save about £2700 in interest
on mortgage term.

It does seem like using Martin's overpayment calculator to make the decision
looks like the right one but it just sounds wrong to not pay off the one im
paying to most interest on every month!

Imma_Number

The one with the higher rate.
Paying £4000 off the one at 2.19% saves you £7.30 per month in interest.
Paying £4000 off the one at 2.69% saves you £8.97 per month in interest.

It's not about the total interest per month but the amount of interest per £ of balance i.e. the rate.

Beckyy

Overpay the one with the higest interest rate.

The figures/balances for each one mean nothing for OP purposes, it's the rates that are the most important.

millysg1

Thank you guys. Much appreciated. I will do exactly that.

Welshlassie

That of course assumes you have no repayment penalties on either of them. If not the higher interest one definately