What to do with £10,000 if I have a mortgage and loan

BadVegan1973

I have a mortgage with 20 years and £145,682 outstanding. Interest is fixed at 1.19% until Dec 2026. I have a 5 year loan for £30,000, (4.9% APR) which I'm 12 months into and there's £27,036 outstanding. 

Now the good news. I have £10,000. Do I:

• Overpay my mortgage by £10,000
• Overpay my loan by £10,000
• Neither, invest the £10,000

Thanks in advance,

Steve

Brie

Assuming there's no penalty for overpaying on either then you should, IMHO, pay off some of the loan.  Higher interest, higher impact for you.  Interest rates for savings are dropping so little value tucking it away.  

kimwp

I agree with Brie

Martico

However, it can be worth - if you're comfortably able - to keep a fund (some aim for 3 months spends, some 6 months, some more) in an easy access savings account, in case of job loss or sudden unexpected spend

13thlegion

Looking at the information you have given the most sensible thing to do probably is:

1. Set up an emergency fund if you do not have one (at a figure you are happy with, 3 months of bills unavoidable spends is a common figure) and do not touch it unless in dire need.
2. As long as there no penalty overpay the loan. £10k is 20 months saved and interest avoided.

pogg000

If you overpay the loan the monthly payment will remain the same.

enthusiasticsaver

I suggest you overpay the loan. Investing it gives no certainty you will achieve growth of 4.9% per annum. The mortgage is cheaper in terms of interest charged so I would leave that untouched for now. 

As others have said check there is no penalty for overpayment. 

sparks_2023

I'd save it until December 2026 when you remortgage - then you could get an offset mortgage with a savings account linked to the mortgage account and offsetting the outstanding balance which interest is actually paid on.

BadVegan1973

Thanks for the advice folks. There's no penalty on the loan, so I've cleared £10k off the balance. It means I'll pay off the loan early, I'll get a refund back on some of the interest, & the loan will clear a few months before my mortgage term runs out & the rate goes up.