Which Mortgage is best to pay of?

bazza1603

Hi,

I have recently move and ported my mortgage over. I took another mortgage for the extra I needed.

I Owe

£24k Balance £23896 fixed until 31 Dec 12 at 6.69% over 24 years
£65k Balance £64849 fixed until 31 Mar 12 at 5.17% over 19 years 6 months

I can afford to overpay by £45 a month, but the maximum I can over pay on the 1st mortgage is approx £33.

Can I make sure I am doing the right thing paying the smaller mortgage 1st?

Thanks in Advance

Baz

Dithering_Dad

The smaller mortgage has the larger interest rate, so it would be better to pay this off first.

Plus from a psychological standpoint, the smaller mortgage will be paid off much faster and will really spur you on to keep overpaying.

Good luck!!

Kaz2904

What he said! But as you have more than you can pay off the lowest one you can overpay both which is great!

getmore4less

What I would have(*) looked at is to make the cheaper mortgage Interest only for as long a term as possible and the more expensive loan over a shorter period to increase the payment. and pay off more debt at the higher rate.

Assuming you have emergencies/loss of income covered I would set the repayment loan so that part of the payment is an overpayment to give a little bit of flexability in the budget.

* some lenders allow these changes without penalties or charges so you may still be able to do it.

Looking at the 4year period to march 2012 the 3 options look like this
The mortgages would look something like this based on your payments

---

M1 £167pm £24k 6.69% over 24 years
M2 £440pm £65k 5.17% over 19 years 6 months
in 4years outstanding ballances are
M1 £22132
M2 £56399
TOT £78531

---

overpayment.
£33 on loan 1 £12 loan 2, in 4years the outstanding ballances are
M1 £20311
M2 £55758
TOT £76069
SAV £2462
The other quick estimate is saving £33@6.69+12@5.17 =£2449. so looks about right.

---

M2 £280pm £65k 5.17% interest only.
Surplus including overpayment is (167+440+45-280)=372.
M1 £372pm £24k 6.69% 6y 9m
After 4years
M1 £10821
M2 £65000
TOT £75821
SAV £248
The other way to work itout roughly, 200pm@1.52% over 4 years gives interest saving of £300 so the switch saves around £250-£300 (note different calculators will give slightly different results) over hte 4years.

bazza1603

Getmore4less. - Great idea that I hadnot thought off. Only problem is I can only pay a maximum 20 percent of either mortgage.

I will try and pay a little extra from the larger mortgage as well.

Thanks again

Regards

Barry

melvis

If you reduce the term of the mortgage, this will increase the monthly payments without taking up your overpayment allowance.