2 mortgages - 1 property. Overpay on which?

Ourfamilyxx

Good morning fellow mse's!

I hope someone could please help me as I can't seem to work this out. We're in a position to overpay our mortgage by £400 per month (no overpayment charges). This is the mortgage we have:

£70k - at 2.99% fixed until September 2018 (ported from our previous property)

£90k - at 3.35% fixed until September 2019 (the additional money borrowed to buy our new property)

Now, I called the bank for advice on which account I should overpay, and they said, simply pay the mortgage at 3.39% which makes sense.

However, we're gonna be paying svr on the first mortgage for a year (from September 18) so that come the end of the 2nd fixed rate mortgage in September 19, we'll merge the borrowing into one.

So because we'll be paying the svr, currently 3.69%, am I better trying to clear the 2.99% mortgage so we'll be paying less interest when we go on to the svr?

Amy advice and/or clarification would be greatly appreciated.

Many thanks,
Ourfamilyxxx

silvercar

You have over 2 years at 2.99 plus a year at 3.69, so weighted average is 3.22 vs 3.35.

So still makes sense to reduce the 3.35.

Joy_mate

Hi
Why you want to merge the mortgages? Does it make any changes in repayment or interest?

dimbo61

Simple really overpay the part with the most expensive Interest rate.
Now at the moment its the 3.35% part but once the other part goes onto the SVR see which part is the most expensive and overpay that part.
If you can overpay both parts !!
Very MSE

getmore4less

silvercar wrote: »

You have over 2 years at 2.99 plus a year at 3.69, so weighted average is 3.22 vs 3.35.

So still makes sense to reduce the 3.35.

Not that simple.

You have to look at each overpayment separately as there is a point where switching the overpayments the the lower rate mortgage is the better option over the full period.

Obviously if you let the 2.99% go to 3.69% then the overpayments go there that gives a date of sept 2018

before that you have the payment the month before

£400 saves different amounts for each rate
a. 2.99%
b. 3.35%
c. 3.69%

for any given month X before Sept 18 the equation is

(X+12) * b == (X * a) + (12*c)
X(b-a) == 12(c-b)
X = 12(c-b)/b-a)
X = 11.33

Switch the overpayment to the lower rate around Oct 17

exact timing will depend on the real dates and if SVR moves