Over payment advice please

Missiemooie

We have a personal loan which is about to end freeing up £220 each month which I would like to try and use to over pay the mortgage.
Due to a remortgage for home improvements it is made up of 2 sub accounts.
Sub account 1 is £62.378 which takes £430 of our monthly payment.
Sub account 2 is £15.913 and uses £114 of our monthly payment.
Both sub accounts end at the same time. I do not know whether it would be best to make any over payments off the larger amount only or if I should split the payment between the 2 sub accounts.
Thanks for reading and any advice greatly appreciated

giblet1979

Is there any difference in % interest paid on the two accounts and/or any limits as to how much you can overpay without penalty? That may help your decision i.e. overpay the one with the highest interest first, and don't incur overpayment penalty.
Good luck x

greent

Do you know the interest rates on the accounts? ARe there any penalties for over paying on either or both accounts?


If both interest amounts are the same (the length of the mortgages appears to be the same) and there are no penalties then I personally would throw all of the extra money at the small mortgage - the debt would be cleared sooner and psychologically (for me) having one less debt would be a big thing


However, that depends on the int rates and any possible penalties x

Missiemooie

Thank you both for replying.
Sorry, I should have said that both sub accounts have the same % interest rate and both run for the same length of time.
It is a SVR at the moment so no penalties for overpayment, certainly not for the amounts that it would be.

Gaz83

If both accounts have the same interest rate and there are no penalties for overpaying then, from a financial point of view, it doesn't make any difference whatsoever what account you pay them to.

Personally, I'd aim for the smallest one first, because I'd feel that having one payment stop altogether would seem like a small victory!

Missiemooie

Thanks, I had wondered if paying of some of the larger amount and therefore making it smaller would bring down the amount of interest paid. Or does it make no difference as the total doesn't change? Sorry if I am being a bit dense!

Marcello

Gaz83 wrote: »

If both accounts have the same interest rate and there are no penalties for overpaying then, from a financial point of view, it doesn't make any difference whatsoever what account you pay them to.

Personally, I'd aim for the smallest one first, because I'd feel that having one payment stop altogether would seem like a small victory!

I agree with Gaz83, I have 2 sub accounts both same rate but hitting the smaller sub account first, will be a moral victory ahead of the larger sub account.:)

greent

Missiemooie wrote: »

Thanks, I had wondered if paying of some of the larger amount and therefore making it smaller would bring down the amount of interest paid. Or does it make no difference as the total doesn't change? Sorry if I am being a bit dense!

As both are on the same terms re interest and length of term, then there is no difference as the overall monthly total would be the same whichever you OP'd
eg: (made up figures)


Month 1
sub acct 01 - balance 65000
sub acct 02 - balance 10000


Overpayment of (say) £500 directed to either acct will still leave the same overall balance at the end of the day, so no difference to your pocket. But OP-ing every month to JUST sub acct 02 will mean this is paid off relatively quickly, leaving you with 'just' one mortgage account - which you can then throw everything (both the OP and the standard monthly payment from sub acct 02) at and reduce that one quickly

Missiemooie

Thank you very much. That all makes sense now - decision made. Thanks again everyone
X