Which part to overpay?

Hello123_2

Hi all,

Recently did some additional borrowing for an extension. To be able to pass affordability, we had to extend the entire mortgage to 30 years. It was previously 19 years and ideally we want to get it back down to that. We can afford to overpay at present since the term is so long. 

I can’t figure out which part we should overpay that makes the most financial sense?

£200k @ 1% until Oct 2023
£55k @ 3.7% until Sept 2025

Should we overpay the 1% balance because it’s inevitable that rates are going to be higher next year when the 1% ends? 

The £55k was just borrowed for an extension. Fixed for 3 years. 

I can’t figure it out!

Thanks  

dark^knight

In terms of monthly interest you paying about the same amount:

£200k @ 1% - £167 per month
£55k @ 3.7% - £170 per month

As you have suggested, I would say the same, i.e. attack the £200k so that when the fix rate ends you'll have less borrowed capital to pay interest on.

Zerforax

Do you have a limit (e.g 10%) overpayment? Might make sense to overpay on the 200k since you could overpay a larger amount in that case?

I agree with dark^knight as the 200k will likely have a higher rate than the 3.7% if renewing in a year. That said, who knows we could be in a recession by then and rates may come down again!