Two mortgages - which one to overpay?

odizzle

Hi All,

New to the forum and wondering if you can help us. We’ve just recently moved house and have a mortgage in two parts £100k interest only and £354k repayment, both with the same interest rate and a term of 25 years.

Our intention is to overpay when possible, however I cannot work out which of the two loans it would be most advantageous to overpay – the interest only or repayment part. The bank have not been much help as they say they cannot provide financial advice, which I understand but it’s no less frustrating.

Appreciate in advance the opinions received.

Thrugelmir

How do you intend to repay the interest only only part of the mortgage?  Seems as if paying this down is the most appropriate course of action. 

odizzle

The intention is to chisel away at either the repayment mortgage or the interest only part with monthly overpayments, the question is which part to attack for the best financial outcome over time...

Whats_your_forte

Interest only!

(The overpayments are to get shot of the debt and clear the mortgage. The Interest Only element would only be addressed once the bigger element has been cleared if payments were channelled into the repayment aspect first. Get rid of the uncertainty would be my rational)

fewcloudy

odizzle said:

The intention is to chisel away at either the repayment mortgage or the interest only part with monthly overpayments, the question is which part to attack for the best financial outcome over time...

I think you'll have to do more than 'chisel away when possible' at the 100k interest only!  I mean, if you do nothing at all but pay what you are contracted to pay to each of them, after 25 years one amount is the zero, the other balance is still 100k right?
Unless you have some other product/plan in place to clear the remaining 100k in 25 years...?

Thrugelmir

odizzle said:

The intention is to chisel away at either the repayment mortgage or the interest only part with monthly overpayments, the question is which part to attack for the best financial outcome over time...

If the interest rate is the same on both products then there's no difference. By tackling the interest only part you'll at least have full visibility on the amount that needs to be repaid. Might even incentivise you to reduce the debt quicker. 

getmore4less

Many prefer the repayment part as that gives more flexibility as the contractual payment drops. 

Thrugelmir

getmore4less said:

Many prefer the repayment part as that gives more flexibility as the contractual payment drops. 

Likewise the interest only part. Monthly payment will be revised at next change of interest rate.