Overpaying sub accounts

Me4355

Hi,

I have 3 sub accounts and allowed to over pay by 20% per year.

1) 43,300  left allowance overpayment until Dec £6,500
2) 10,300 left allowance overpayment until Dec £1,700
3) 1,882 left allowance overpayment until Dec £184.00

they all have the same interest rate 5.41% fixed ends March 2026. I am overpaying £500+ extra per month. I will clear the overpayment allowances on sub 2 & 3 for this years allowance and pay the remainder of the £500’s off sub 1.

Our mortgage has 8 years left and I don’t want to reduce monthly payments, so I pay under £1,000. Per month which doesn’t change monthly payments. when we re mortgage I am going to reduce the years by 4 (years).

My question is:
1) is this the best way of doing it?
2) should I pay the £500+ off the bigger balance first due to paying more interest (per sub account) or does it not really matter?
3) sub 3 will be approx £1,600.  When it re sets in Jan should I just pay that off, the penalty will be 0.75% so approx cost me £12.00 
4) Any other options that I haven’t thought of?

Thanks in advance

BarelySentientAI

2.  If they are all the same interest rate, whichever overpayment you make saves you the same amount of interest.

3.  You say it costs you £12 to pay off, how does that compare to the interest you would pay by not?  That tells you what you 'lose' by the fee.  From what you've said, it seems like it's worth doing.

1. & 4.  If your intention is to be paying off the mortgage, fine.  If it's about making the best use of your money, have you considered high interest savings accounts (i.e. something more than 5.41%) and then lump-sum overpayment when it comes to remortgage?

Me4355

Thanks for your reply. 

Yes I have high interest account 7% & 6% but you can only pay in a certain amount per month on each  (I am already paying in  the max on each). The money I am using for the overpayments is a 4.1% account, so to me it makes sense to overpay rather than sat in a lower % account. 

I thought that was the case due to being the same amount of interest on each sub account.