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Which is better?

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Wellgood
Wellgood Posts: 88 Forumite
Part of the Furniture 10 Posts
in Mortgage-free wannabe
Overpay mortgage of £116k with rate of 2.5% or £55k mortgage at 3.99%. Or both at same time? By my calculations I think it is better to pay off the £116k one as we pay more interest a year on that one. However that goes against my instinct that the other one has the higher rate. Thanks to anyone who can clarify? Sorry if this is a dumb question!

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  • getmore4less
    getmore4less Posts: 46,882 Forumite
    Part of the Furniture 10,000 Posts Name Dropper I've helped Parliament
    edited 27 June 2015 at 8:41PM
    higher rate is better.

    what calculations are showing the lower rate?
  • Dalradian
    Dalradian Posts: 167 Forumite
    Tenth Anniversary 100 Posts Combo Breaker Mortgage-free Glee!
    Are they on the same house? If so, pay off higher rate one first. If one is BTL then don't overpay, as you can use the mortgage payments to offset against tax.
    Mortgage Free 2024
  • getmore4less
    getmore4less Posts: 46,882 Forumite
    Part of the Furniture 10,000 Posts Name Dropper I've helped Parliament
    Dalradian wrote: »
    Are they on the same house? If so, pay off higher rate one first. If one is BTL then don't overpay, as you can use the mortgage payments to offset against tax.

    Only the interest,

    Still better to overpay the higher rate for a 20% tax payer.
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