Overpayment personal loan or mortgage

Jfirth002

Hi,
So my question is about which is it better to overpay each month.

I've a mortgage at 4.79% interest for 2 year fixed 25 year term and a personal loan 2.79% with 3 years and 7 months left on it. Current I can afford to overpay one of them by £100 each month. 

I'm wondering is it best to overpay either the mortgage to reduce the term or the personal loan so it is cleared quicker? Or alternatively do I move the £100 into a savings account I've a Santander saver with 5.2% interest. Would appreciate any advice?

Martico

First question - do you currently have a buffer / emergency fund in savings? To guard against job loss and / or high value emergency repair to car / boiler, etc. Different amounts are advised by different people, but 3-6 months of total spends is a pretty common ballpark figure to aim to have saved. As neither interest rate is high, I don't see an urgent need to pay down those debts. If you already have a good savings buffer, then I'd start chipping away at the mortgage. It's a higher rate, and is a secured loan.

enthusiasticsaver

Personally I would put into savings as the rate is higher. Nothing to stop you putting a lump sum on to the mortgage when you come to negotiate the next rate as long as there is no penalty. 

Jfirth002

Thank you for the reply. We have a buffer but it would be just over 2 months so maybe building that should be our focus for the minute. Then looking at overpayment afterwards. Thank you

Stateofart

Mortgage interest is usually higher so the more savings can be had by overpaying the mortgage.  It's a long game though.