Overpaying mortgage - Four accounts

mistertea

Hi, I’m wondering if anyone who has a better understanding of mortgage maths than me could help please?

I have one mortgage which is split into four unequal accounts with the same lender. I’ve ended up like this because initially I had half the mortgage as a fixed rate and half variable, then borrowed an additional amount when buying a new house, then borrowed a further amount to fund extension and renovation work. All four accounts are now on the same five year fixed rate, my lender allowed me to pay only one product fee but would not allow me to consolidate into one account.

I am overpaying every month in order to reduce the mortgage term. Currently I only overpay on one of the mortgage accounts, I just went with account with the largest balance to chip away at.

Is there any benefit for the monthly overpayment to be either:
- £400 against only one of the accounts,
- or £100 against each of the four accounts,
- or unequal proportionate amounts against each of the four accounts?
- Or does it make no difference in the long run?

In any of these scenarios I would not exceed the 10% annual overpayment limit, so no penalties to worry about.

Typhoon2000

Overpaying the account with the highest interest rate would be the best.

getmore4less

If the lender will do the same and only charge one product fee(If that is better) then interest savings will be the same.

There may be some softer reason why one is better than another.

you might want a sub account to be on a different plan as you know you have some money coming or may be able to overpay more than 10%.

You might target one of the accounts to hit a particular amount outstanding and go onto 2 year fix or even variable.


even with your overpayment it might have been an idea to have one bit on a lower rate and a 2 year fix if you knew you could pay it off quickly.

enthusiasticsaver

As they are all on the same interest rate it makes no difference from an interest point of view. Are they all on the same term? I think I might be tempted to target the one with the longest term or if all on the same term the smallest balance with the aim of getting it paid off soonest. As each tranche is paid off then you direct all repayments to the next one up. I don't think there would be any difference financially though but if you move products again it makes it less complicated the less loans you have.

mistertea

getmore4less wrote: »

you might want a sub account to be on a different plan as you know you have some money coming or may be able to overpay more than 10%.

Thanks, I hadn't considered putting one of the accounts on a tracker, that would not have incurred any additional product fee and would have left me the option to overpay more. I'm 1 year into the 5 year fix so I've missed a trick there - but will keep that in mind when shopping around next time.

mistertea

enthusiasticsaver wrote: »

As they are all on the same interest rate it makes no difference from an interest point of view. Are they all on the same term? I think I might be tempted to target the one with the longest term or if all on the same term the smallest balance with the aim of getting it paid off soonest. As each tranche is paid off then you direct all repayments to the next one up. I don't think there would be any difference financially though but if you move products again it makes it less complicated the less loans you have.

All on the same interest rate, and all terms are within 2 months of each other. The idea of targeting the smallest balance is appealing when you put it that way - thanks. It's the complete opposite of what I've done so far, which I think I did just because I didn't like the look of the larger balance figure so wanted to hit that first.

dimbo61

The main thing is to keep overpaying each and every month.
You are overpaying the largest part of your mortgage so £4,800 a year ( well done)
Just make sure you don't go over the 10% limit which may well apply as your in a fixed period.