Overpay repayment or interest only mortgage element?

MarkChristie59

Hi I'm thinking of overpayments, but have a £30k repayment element and a much larger interest only mortgage element. Which should I select to overpay e.g. £50-100 per month on? 

CSI_Yorkshire

Whichever has the higher interest rate.

Or put the money into savings if that rate is higher still.

MarkChristie59

Great thanks - both are on 1.59% fixed terms until mid-2025. 

CSI_Yorkshire

Then put the money in an account earning 4%+ and then overpay as a lump at the end of the fixed term if you still want to.

Overpaying now would be losing you money in comparison.

silvercar

CSI_Yorkshire said:

Whichever has the higher interest rate.

Or put the money into savings if that rate is higher still.

I agree, though if you are ever short of cash in the future, reducing the repayment element will reduce your monthly payments by more.

Do check if there are any early redemption penalties if you repay before your fix ends.

MarkChristie59

Thanks very much both, very logical!