Which mortgage to overpay on?

kimmer

Hi,

I have two mortgages, 1 is a buy to let and 1 is residential. The BTL is for around 68k with 15 years left at around 3% (current 5 year fix) interest only but I am overpaying 200 a month. The other is for around 125k at around 1% (current 2 year fix) with 26 years left but I am overpaying 50 a month.

I have about 100 a month extra I could be overpaying more on, which should I focus on to reduce so I am just looking to reduce the amount of interest I pay over the next 15 years? I have separate money that I pay into savings to build up my emergency fund.

Thanks,

silvercar

The first question is what else could your money be doing for you, if you used it elsewhere eg investment, pension, savings.

if you do want to reduce your mortgage, then the btl only attracts a little bit of benefit in terms of tax now that it is restricted to basic rate as a mortgage expense, so the effective rate on the 3% is 2.4%. So on that basis it is better to reduce the btl mortgage. But things can change and you may also want to consider your ability to borrow further if you needed to or wanted to move.

Bluebell1000

Personally I'd look at something like a regular saver. See if you can earn 3% or so on savings. That'll be more profitable than paying it into the mortgage now, and you could use it to pay off a lump sum when your mortgage renewal time comes around.