Advice needed for options re paying of loans first or mortgage

hs61

Hi


I have a mortgage of approximately £73000 ( made up of £16000 mortgage and £57000 of additional borrowing) with T.S.B. which has an A.P.R. of 2.25% and has 39 months to run.
I am presently paying £550 per month plus additional payments of approximately £1400 per month to clear this.
I also have a T.S.B. loan of £21600 (over 5 years) taken out 18 months ago at an A.P.R. of 13.9% which as of today has a balance of £17150 and I am paying £510 per month to clear this.


My question is would it be better to stop paying the additional amounts to the mortgage and channel the £1400 to the loan payments on the loan in addition to the existing £510 I pay already? Would this save me money in interest payments and if so roughly how much? Also if I do approximately when would the loan be paid of?


If I did this I would then hope to return to the mortgage and pay the £550 plus the £1400 plus the £510 and wonder if it would mean I would still finish paying of the mortgage at the end of term in roughly 39 months time?


Would be very grateful if anyone could advise on this or direct me to calculators to help me work this out. I just want to try and save some interest payments and I am thinking that paying the higher interest loan of first would help me to achieve this


Thanks in advance


Hugh

[Deleted User]

You'll save much more by paying off the loan, as the APR is higher.

Google 'loan calculators' for a choice of tools to run various scenarios/

hs61

Thanks for the advice zx81

hs61

Just an update....
managed to clear the TSB loan and also £4000 of credit cards and now targeting my mortgage.
As of today my only debt is mortgage related and consists of £58000 in total which I predict to be all cleared by July 2020 as I am paying £580 per month plus approximately £500 per week in additional payments.
Getting there and looking forward to the light at the end of the tunnel :beer:

System

Rule of thumb is that to make your money work the hardest whatever has the highest interest rate gets the money first.

So that may be you have a loan on a low APR and a loan on a higher APR so you overpay the higher APR as per £1 overpaid you will save more in interest on the higher loan APR.

It may be that you have a savings account with an interest rate higher than a loan in which case your money goes into the savings account as per £1 put into it it'll earn more in interest than you will be charged per £1 in interest on the loan.

hs61

Hi Again.
At the end of November this year my total mortgage debt total will be £52000 ish.

This is made up of :

My main mortgage.......... £7500
Sub account with .......... £4400 (which I will clear by 31st Jan 2019)
Sub account with .......... £21000
Sub account with .......... £19000

Mortgage and Sub accounts are all at 2.5% and I pay approximately £560 per month PLUS £500 per week to clear all by July 2020:j

My question is, would there be any benefit in paying off my mortgage account first after I clear the £4400 sub account in January and then continue with the existing monthly and weekly payments targeting those final 2 larger sub accounts? Just not sure if its better to be clearing the mortgage and let the additional weekly payments to take care of the other 2 sub accounts.

Appreciate any input or thoughts. Also when my mortgage is paid what happens to the house deeds? What do most people do with them, keep them at home or have to bank keep them? I assume they charge for this:D

Thanks:)

DrEskimo

hs61 wrote: »

Hi Again.
At the end of November this year my total mortgage debt total will be £52000 ish.

This is made up of :

My main mortgage.......... £7500
Sub account with .......... £4400 (which I will clear by 31st Jan 2019)
Sub account with .......... £21000
Sub account with .......... £19000

Mortgage and Sub accounts are all at 2.5% and I pay approximately £560 per month PLUS £500 per week to clear all by July 2020:j

My question is, would there be any benefit in paying off my mortgage account first after I clear the £4400 sub account in January and then continue with the existing monthly and weekly payments targeting those final 2 larger sub accounts? Just not sure if its better to be clearing the mortgage and let the additional weekly payments to take care of the other 2 sub accounts.

Appreciate any input or thoughts. Also when my mortgage is paid what happens to the house deeds? What do most people do with them, keep them at home or have to bank keep them? I assume they charge for this:D

Thanks:)

As with your first question, you want to overpay on the loan/mortgage that has the highest APR.

If all the sub-parts of the mortgage are being charged at the same APR, it makes no difference where the additional overpayments go.

2.5% is relatively high given the mortgage amount though...what is the LTV? I've just renewed my mortgage and with 50% LTV and I got a rate of 1.4% with HSBC (2-year fixed).

hs61

Thanks DrEskimo.
My house is worth approx 300000 and total mortgage debt is approx 53000.
I am with T.S.B.
What sort of difference would it make if I were to re-ortgage and get a rate of around 1.5% in terms of interest saved?

Thanks

DrEskimo

hs61 wrote: »

Thanks DrEskimo.
My house is worth approx 300000 and total mortgage debt is approx 53000.
I am with T.S.B.
What sort of difference would it make if I were to re-ortgage and get a rate of around 1.5% in terms of interest saved?

Thanks

If you do pay it off in just 22months, not a lot!

About £1200 vs £700, so around £500 saving.

With just 18% LTV you should easily be able to get a rate <2% though. Are all the mortgages on a single product, or do they have separate products with different end dates? You need to factor in any fees to changing deals early, which might wipe out a lot of that saving.

D_M_E

You may be better off continuing as you are - if you do get a remortgage at a lower rate, you could well find that any penalties for clearing it within 2 years may well cost more than what you would save.

Check what the terms are for early redemption and then decide.

hs61

Thanks for all the advice!!!!
Think I will just stay paying the way I am as savings appear to be minimal and potentially zero if I have to pay fees for switching.
Can anyone advise re my question about mortgage deeds in original post please?

Thanks