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I am getting the internet connection from my local area ISP. I want to use two routers on this connection: [Router 1] for general mobile device WiFi usage and [Router 2] solely for my PC for online gaming via Ethernet. My reasoning for this is that when I enable WiFi on [Router 2] it gives me high ping spikes while playing online games.

Would LAN-LAN or LAN-WAN be better between the two routers?

Will the internet usage on [Router 1] affect my latency on [Router 2] through which I will be playing online games?

Will the second router get its IP address dynamically just like the first router?

To give your computer the priority on bandwidth, it should be connected to the
first router.

The second router for WiFi should be connected to the first one by LAN-to-WAN,
as this will make your computer an equal partner to the entire [Router 2]
sub-network, so the computer will always be able to use at least 50% of the bandwidth for itself.

[Router 2] should also be a DHCP server, since its sub-network will be
completely isolated from your computer.

If the first router supports
Quality of service(QoS),
it can be configured to give your computer the absolute priority
when required - so during heavy gaming sessions your computer may use up to whatever bandwidth limit you have set (100% is likely too high so an 80% cap might be better).

Yes it will. It's a shared resource.

I want to keep WiFi disabled on router#2 so that just one PC is connected to it using Ethernet cable.

That makes the second router completely useless.

Routers do not get special priority in a network; they are just ordinary network devices. It doesn't matter if your PC is connected via router2 or directly – eventually it still goes through router1, so it has to share router1's capacity in exactly the same way. If router1 uses a bad queueing algorithm, or if its CPU is overwhelmed by traffic, router2 can't do a thing about it.

The same goes for your whole Internet connection. If it's the bottleneck, then it won't gain extra capacity nor a "dedicated lane" just because you have more routers.

Instead, you should figure out why the latency spikes occur. (It most likely is a problem with router 1 and not with the uplink connection.) Try swapping the two routers, if the 2nd is more powerful. Try to correlate the spikes with a specific device being connected, and with a specific program running on it. Research "Bufferbloat". If there's something using 100% of your upload bandwidth (e.g. a laptop seeding 100s of torrents), limit it to 90%. Etc.

If I am reading this correctly - you want to use one router as a wireless access point and the other router for wired only connections.

As you only have one connection to your ISP one of these routers will need to plug into the other - and that will be a LAN to LAN connection. I'd suggest the one being used as a wireless access point is plugged into the other router and that router does the LAN to WAN to the ISP connection.

I'm not sure this will be of much benefit to you though. You will get exactly the same contention for bandwidth as just using one router.

One good router, with QoS tools to enable you to prioritise traffic on the port the gaming PC plugs into would probably give you better results.