which house do i pay a lump sum off of?

[simonJ007]

i have two houses, one with an oustanding balance of 160k and the other with 290k. i have a lump sum of 20k. which house should i pay the lump sum off of?

[murraymints]

whichever mortgage is costing you more !

[simonJ007]

thanks for the prompt response mark. i have been told by a friend that it is better to pay off the smaller mortgage to get it down to 50% of the total value of the house...not too sure if this is sound advice or not!

[murraymints]

think you have to consider mortgage life as well as cost what is going to cost more long term ?

[simonJ007]

at the moment both have 18yrs left to run, more or less. it just sounded good to get one a small as possible. maybe i am heading in the wrong direction with paying off the smaller one first

[murraymints]

I am sure your bank will advise !

[R1Geezer]

are both mortgages the same rate? if so then yes pay it off the smaller one.

[society]

I too would pay on the house with the less balance.

[R1Geezer]

regardless of the interest rate society?

[Dris]

Also depends on which type of mortgage.
If they are repayment then the balance/years reduces quicker so I would opt for the smaller one as that would reduce your years left far quicker.

[society]

This is how I'm thinking...

Yes. Both houses have 18 years left to be paid of. Why not get the cheapest one over with. Down the road property value is more than likely to rise and if push come to shove it might bring in a profit if sold, or it could always be refinanced.

[R1Geezer]

so if one has an interest rate of 10% and another of 5%, you's still pay off the one with 5% if the balance was lower? Right oh!

To save the most pay off the dearest, if rates are equal pay off the smallest, end of. There is only one kind of mortgage.

[Dris]

simon hasnt said yet...so we're surmising.

I know of the 2 we have I would pay the lesser one off and get that millstone out the way.I'm at the stage now (yippee) if I were to pay an extra £100 a month it could be paid off fairly quick as i'm now basically paying off the loan rather than the interest.

[simonJ007]

thanks for all of the responses here is a touch more info: the first house (160k outstanding) and is interest only mortgage 3.4% and the second is a repayment at 6.4% fixed term (soon to go down to around 3.8% with the end of the term). Both have eighteen years left. i make small over-payments on the smaller one and just the monthly repayments on the larger....

[Dris]

Not sure if you can make overpayments on an interest only mortgage-in fact im sure you cant.
I would concentrate therefore on your 2nd mortgage as you have more chance of bringing the o/s amount amount down far quicker.
That is just my opinion -I would take advice.Run it by a Financial Advisor-it may even pay to change your 1st mortgage to a repayment as well.

[factor-fiction]

It also depends on whether charges are made for paying off some of the mortage. Some limit overpayments in any one year to maybe 10% of the balance so it may be better to split the overpayment to avoid charges

[simonJ007]

i can pay upto 10% of the outstanding balance on either of the mortgages.

[bushbaby_de]

I would make a capital repayment on the interest only mortgage - then your monthly interest bill will be reduced as well.

[R1Geezer]

of course yoou can make overpayments on an interest only mortgage, just find out the SC/ACC data and pay it direct using internet banking, I do it all the time, that way if I find I have spare cash I pump extra into the mortgage best way of saving there is.