Mortgage overpayments with two subaccounts

almalobana

Hi there,

Looking to sense-check my mortgage overpayment plans...

Our mortgage has 2 sub accounts - one with a higher amount of borrowing on a 1.45% interest rate, and one with a lower amount on a 1.88% interest rate. Both are fixed until Jan 2024, and on each sub account we pay approx £228 of interest per month (£456 interest total, eek! Obviously it varies depending on the length of the month, this is our end of March figure)

Up until now, when we've made overpayments they've all gone on the one with the higher interest rate, as even though we had a lower amount of borrowing, the amount of interest going on each month in £ was higher. However, we've just reached the point where the amount of interest going on to the two accounts is basically equal (within a few pennies).

So: does it make more sense to continue overpaying the sub account with the higher interest rate, switch to the one with the lower interest rate, or split OPs between the two? I think we should stick to overpaying the higher interest rate, but looking at it in £s has made me doubt my logic...

Thanks!

[Deleted User]

You should always target the highest rate. The balance makes no difference.

A £100 overpayment will save you more interest on a higher interest balance.

almalobana

@Deleted_User - thank you! I shouldn't have distracted myself with the numbers and just stuck to looking at the rates. 

penners324

Just be aware of the EPC on the higher element. Don't overpay more than 10% on that sub account in the year.

If near it switch the overpayment to the other part of the mortgage