Nationwide BMR Part & Part mortgage - which Part to pay early ?

motorhead_2

I have a Nationwide Base Mortgage Rate (BMR)  mortgage currently I'm paying 2.1% interest with about 4 years left to its redemption with a balance of £62K where 

• £52K is at interest only 
• £10K is at capital + interest

I have £10K saving that I could use to pay some early, and with the BMR deal I believe there are zero charges if if I do so; and  I can direct it at which ever Part I choose.
Should I  pay off

• some of the interest only part
• all £10K at capital + interest part

Any tips?
Thanks 
MH

PS. I know I should perhaps I should also move this mortgage to get a better rate;
I see Nationwide offer me 3 Year Fixed at 1.59, though I see the overpayments limit would become less £8K (dont know if that's annual or total figure!?!)  
I might be in fortunate position to make more overpayments in next few years so don't know if I should sacrifice the current BMR flexibility.
I guess this last bit should be is a separate question!

Thrugelmir

What's your plan to settle the interest only part? Paying this part down at least provides you with a visible objective. 

motorhead_2

Thrugelmir said:

What's your plan to settle the interest only part? Paying this part down at least provides you with a visible objective. 

@Thrugelmir We have a endowment for that the interest-only part.
BTW I asked a separate question as specifically on that, as it a whole separate can of worms! :-) 

getmore4less

It makes no difference to the cost, if they change the payment you can still up it back to where it was.

if you paid off the £10k what would you do with the ~£220pm it saved


On the £52k
They have a 2y fix at 1.49%  would save around £750 over 2 years and then you have a window to overpay more than 10%

The £52k will cost around £4400 in interest if you leave it at 2.1% for 4 years
You are going to knock at least £1k off that with a fix for 3y and more if you overpay as well.

Are you happy to lose the reserve if you fix..

motorhead_2

getmore4less said:

It makes no difference to the cost, if they change the payment you can still up it back to where it was.

Sorry I don't quite follow this part ! If I pay 10K tomorrow I can have either 

• £52K is at interest only ; none at capital + interest

• £42K is at interest only ; £10K is at capital + interest

Is one of these not better than the other ?

if you paid off the £10k what would you do with the ~£220pm it saved

TBH I don't know yet - I haven't figured that far yet!

Are you happy to lose the reserve if you fix..

yes. And thanks you for reply above - it was very helpful

MH 

getmore4less

motorhead_2 said:

getmore4less said:

It makes no difference to the cost, if they change the payment you can still up it back to where it was.

Sorry I don't quite follow this part ! If I pay 10K tomorrow I can have either 

• £52K is at interest only ; none at capital + interest

• £42K is at interest only ; £10K is at capital + interest

Is one of these not better than the other ?

if you paid off the £10k what would you do with the ~£220pm it saved

TBH I don't know yet - I haven't figured that far yet!

Are you happy to lose the reserve if you fix..

yes. And thanks you for reply above - it was very helpful

MH 

There are only three things that matter with a mortgage(you can ignore full term).
Amount borrowed, rate, payment.
you will still have £52k  borrowed, the rate is the same for both.

The only thing you have control over after that is what you pay.
same money thrown at the debt has the same effect on the interest paid, that is both monthly and overpayments. 

You start out with   
£52k ~£91pm
£10k ~£218pm   (based on 4y with short full terms months is better.)
paying £309pm
after
£42k ~£73.50pm
£10k ~£218pm
£291.50 paying 
or
£52k ~£91
£91

If you want to free up cash flow then the later is better.
if you want to pay it off quicker it does not matter you  throw what you have at it when you have it.
the later give the most flexible option.

How much extra(over £309pm) do you think you will have over the next 2-3 years?

if you can overpay the 10% on either part if you fix

if you set the £10k to a 2y fix 1.49% that is £423pm  £205p extra saves  about £280 in interest over 2 years
then the £42k to a 3y fix 1.59% saves £640 over 3 years

there are other combinations,  to save interest you need lower interest rate and higher payments(borrow less).

motorhead_2

Thanks @getmore4less  - that is very helpful. Previously I it had not really clicked with me how much was currently going towards which part - and seeing it worked out like that is exactly what I needed .
Cheers, MH