Am I correct in thinking that if I spend more than the amount on the small funded address so it also comes of the larger funded address that the mining fee will still stay low.
The more UTXOs you add to your transaction, the more fee you have to pay.
And note that it's not the number of addresses that affects the transaction fee. Transaction size and the fee depends on number of UTXOs you use.
It's possible that you spend bitcoin from a single address, but your transaction has multiple inputs.
I'm assuming that Electrum spends fund from the smallest funded addresses first. Is that correct.
You can use coin control and spend any UTXO you want.
By default, electrum tries to minimize the transaction and if there are multiple UTXOs in the same address, either it uses all of them or none of them.