My wife and I have two houses: one her parents live in and has only 4.5 years of mortgage payments left, the other we live in and is only 2 years into a 30 year mortgage. She has been making extra payments on the 4.5 year house for many years, hence it'll be paid off about 10 years early. Most of the monthly payment is now principal, and I estimate if she continues the extra payments it will only pay it off in about 4 years. Both mortgages are a similar interest rate. Should we put those extra payments towards the 2nd house ? Does it even make any difference ?
What are the interest rates? if they are from 10 years ago they could be very high. I would check with a credit union for a 5 year loan at 2.8% interest. Pay off both mortgages with it. And pay the 5 year loan over 5 years or less. I wouldn't pay it early because at 2.8 its almost a free loan due to inflation and the return you can make on your extra money buying low risk assets.
Provided the interest rates are similars, and you still want to make overpayments on mortgages, then the best option is to put all the capital (available for overpayment) in the mortgage which has the longest term left.
In most cases this is going to be the mortgage with the most principal left, as in your case it is the 30 years mortgage.
The reason for it is:
if you overpay $1,000 dollars on your mortage with 4 years left. Since it's an overpayment the full $1,000 is paying the principal. So you will save the interest rate (3.8% from your comment) on $1,000 for the next 4 years: $1,000*0.038*4= $152
if you overpay $1,000 dollars on your mortage with 30 years left. Again the full $1000 is paying the principal. This time you will not pay the interest rate on $1,000 for 30 years: $1,000*0.038*30= $1,140
So by paying the same sum on your longest mortgage you already saved the equivalent of one or two monthly payments on this mortage. The saving on the shortest mortgage is not that attractive.
Since your interest rates are similar, you can apply a simple factor to compare any overpayment over the two mortgages: the ratio of time left on the mortgage. R = 30(years) / 4(years) = 7.5
This means that any overpayment on the long mortgage will save you 7.5 times more money than a similar overpayment on the short mortgage. Now take your pick ;-)
If the interest rates are identical, it does not matter, assuming the mortgages have identical tax treatment (if you get a tax break on one but not the other, the situation changes). And: Once the smaller loan is paid off, you must apply its payments to the other.
No matter where you put an extra 1000USD, it will always save you 38USD per year for each year until both mortgages are paid off.