Overpayment confusion

sbs_2014

We have £5k and we want to make an overpayment on one of our debts but are a bit confused about which is the smartest option. Our debts are as follows and all have the option for overpayments:

1. BTL mortgage (thus interest only payments) of £110,000 at 4.24%
2. Mortgage for our family home of £113,000 at 3.95%
3. Personal loan of £12,000 (borrowed 4 months ago to renovate our home) at 9.9%

I initially thought the loan was the best option as its such a bad rate but I'm not sure if I'm right.

Any advice would be appreciated.

PeacefulWaters

Loan. Then mortgage.

BTL bottom of the list if you pay tax and offset the interest against income.

sinizterguy

PeacefulWaters wrote: »

Loan. Then mortgage.

BTL bottom of the list if you pay tax and offset the interest against income.

Exactly this.

sbs_2014

When I enquired with HSBC about making a one off overpayment, they said I will still pay back the full amount including the interest which was originally agreed but once the loan is fully settled they will refund the difference in interest for the amount of time which the loan was repaid early. Is this pretty standard practice?

sinizterguy

sbs_2014 wrote: »

When I enquired with HSBC about making a one off overpayment, they said I will still pay back the full amount including the interest which was originally agreed but once the loan is fully settled they will refund the difference in interest for the amount of time which the loan was repaid early. Is this pretty standard practice?

When I had a loan with Natwest, early repayment charge was 2 months interest.

So if I paid in 100 pounds, they would subtract that from the loan balance and add back 2 months worth of interest for that 100 pounds.

I haven't quite heard of an arrangement like yours, but it depends on the loan agreement and when you may have taken the loan.

thebritishbloke

sbs_2014 wrote: »

When I enquired with HSBC about making a one off overpayment, they said I will still pay back the full amount including the interest which was originally agreed but once the loan is fully settled they will refund the difference in interest for the amount of time which the loan was repaid early. Is this pretty standard practice?

At the end of the agreement, you'll still end up better off than you would have been.

Also, I don't know what LTV your family home has, but you should look at remortgaging. We just remortgaged (granted our house is 18% LTV) and got a 5-Year 2.79% Fix with no fees with TSB.

sbs_2014

thebritishbloke wrote: »

At the end of the agreement, you'll still end up better off than you would have been.

Also, I don't know what LTV your family home has, but you should look at remortgaging. We just remortgaged (granted our house is 18% LTV) and got a 5-Year 2.79% Fix with no fees with TSB.

The market value of our home is around 160k but we would have to pay an early exit fee on our current mortgage of over 5k (we're half way through a fixed rate deal).