two mortages - which to overpay on

pardah

Hi all,

Need some advice. I have 2 mortgages, one is interest only and the other is a repayment. I can overpay on either without penalty so my question is - which one should I make overpayments on?

- P.

grifferz

The one with the highest interest rate, assuming that your overpayments reduce the balance on a daily basis on both.

This is identical to the question of which credit card to pay off, just on a larger scale.

http://www.moneysavingexpert.com/savings/pay-off-debts

kingstreet

You have two mortgages, or you have a mortgage split into two sub-accounts to represent an interest-only part at one rate and a capital & interest part at another?

Not only do you have to think about the rates, but if you have no formal repayment plan in place, you need to think about how you are going to repay the interest-only loan at the end of the term.

Repaying the capital & interest portion as it is at a higher rate than the interest-only bit may not be the most sensible option and you should consider the overall position before proceeding.

scoops82

Sorry for hijacking the post but I have a similar issue.


I have 2 mortgages, one is a CTL on an interest only basis @ 2.5%. Owned 100% by myself.


The other is a residential mortgage at 4.79%, owned by myself but have an agreement with GF that its as 60/40 split as that is how we pay for the mortgage and bills etc. I own 100% as that way we got a better interest rate.


Therefore I have been overpaying the IO mortgage as to not muddy the waters of the split mortgage with my GF in case we end up splitting for any reason.


Should I continue to do that or overpay the higher interest mortgage but include any overpayments as money I can recover when selling the shared house/mortgage?


I hope this makes sense, any advice is welcome.

Thrugelmir

The income from the CTL is taxable. Interest being a tax deductible expense. So you really need to get your calculator out.

Also get your tax affairs in order before the HMRC catch up with you.

getmore4less

If you get the house equity debt situation sorted. it will be much better to overpay the higher rate.

work out the equity situation properly from the purchase time with how much deposits you each contributed and how much of the debt you want to service.


Then service the debts seperately(make two virtual debts to manage this)

The equity share stays the same just how much you each owe changes.