# Repay 5 years loan quicker or increase Mortgage Payments



## Cashstrapped (3 Mar 2007)

Hi, just finished clearing my car loan so I have extra 400euro disposal income each month.  Debating which of the following options makes better financial sense:

Have personal loan with 5 years left at 220 per month - APR 8.63%, if I was to increase monthly repayments using the 400euro it would clear this loan in 2 years.


Mortgage of 180k costing 1,100 per month, 22 years left APR 4.8%.


The personal loan is at a higher rate so it would look like the better option but then my mortgage is over a longer term so although the APR is lower it is over a longer term so costing me more.  Any advice on which would be the better option at the moment, thanks in advance.


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## monkeyboy (3 Mar 2007)

[broken link removed]

try this link to see how much the 400 over payment saves you and compare it to the cost of the other loan.


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## Cashstrapped (3 Mar 2007)

Wow, thanks Monkeyboy it's a no brainer after doing those calculations the additional payments would give me a rough interest saving of circa 3k per year on my mortgage while the total interest payable on the five year loan at the current repayment would come in at under 3k in total after the 5 yrs.

Thanks for that


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## Blinder (3 Mar 2007)

That calculator assumes that you are paying off the €400 extra for the term of the mortgage

As far as I can see you would be better paying the €400 off the short term loan first and then the €400 + current loan payment off the mortgage

After all, 
if you pay extra off the mortgage, you are saving 4.5 % interest on €400

If you pay off the sort term loan, you are saving 8.5% interest on €400


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## Cashstrapped (3 Mar 2007)

Ok I'm still a bit confused, I can see what you are saying Blinder but should I not be taking the overall saving into Account when looking at this as the extra repayments off of the mortgage also results in taking years off of the life of my mortgage?


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## niceoneted (3 Mar 2007)

Whats the LTV of your mortgage? what about switching it to one of the tracker rates available from say NIB or AIB. This will also help. 
I would pay off the loan first so use the extra €400 for that. There is also the option of paying say half the amount of the mortgage and the other half on the loan.when the loan is clear you may need that money to save say towards your next car or something else whereas if you use it all against the mortgage now you may find after a while that you would prefer to have that money to save. 
Depends so on alot of your other circumstances.


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## Cashstrapped (4 Mar 2007)

House is value around 330k, had looked at Tracker Mortgage but there's also costs involved in moving to them so had deceided to hold off until house value maybe rose another bit.  Maybe the 50/50 route might be the way to go for the time being and I might review it again in another 6months or so.


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## idontknow (11 May 2007)

I would definately pay off the short term loan first then put the payments towards mortgage


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