Which part should I overpay?

clemmenza

I currently have a mortgage with two parts:
Part 1 is a 2.40% fixed rate until 31/10/2020, balance £93,920
Part 2 is a 3.10% fixed rate until 31/12/2022, balance £73,983
Remaining term is 32y 11m (I'm hoping to increase overpayments over time to reduce this as much as possible!)

I am currently overpaying: I'm not concerned about needing payment breaks, so my simple question is: which part is best to overpay?

In my head, it makes more sense to overpay on the higher interest rate, but then my brain got whirring and I imagine there are more complex calculations to be done (which I can't work out!) as there is a greater sum left on the other.

In summary, I am currently overpaying on part 2: should I stick with this, or switch to overpaying on part 1, or split it down the middle?

Thanks in advance for any help on this!

getmore4less

It is that simple highest rate.

There are complexities when you are hitting overpayment limits, savings rates, and new deal rates.

savings is easy better net rate than you pay save, don't forget long term savings like pensions.

new deal rate isa little more complex.
If when the top rate finishes the new rate on that will be higher than 3.1% you could be better off overpaying the 1st part now to get bigger saving later.

As you can't predict rates in 21 months time its not worth doing just overpay the higher rate.

but lets do it anyway.

Your overpayment can be at 2.4% or 3.1% for 21 month's that's a difference of 0.7% eg for each £1,000 £7 a year or £7 * 21/12= £12.25.

now when your new deal comes along you have 26 month where you saving will be 3.1% or new rate if the new rate is higher then to save more than the £12.25 the rate difference will need to be more than
£12.25 * 12/26 = 0.565% higher.

What is the best rate you could get today if you were doing a product retention deal now on your estimated LTV in 21 months time?

What will that rate be in 21 months

adamcarvell

my mortgage is in three parts two over 20k one about 2k when i rang up to overpay the first question i got was ok which part do you want to over pay i chose too split the overpayment on the two highest figures.

AnotherJoe

adamcarvell wrote: »

my mortgage is in three parts two over 20k one about 2k when i rang up to overpay the first question i got was ok which part do you want to over pay i chose too split the overpayment on the two highest figures.

You should pay just the highest