Let's find out just what a fixed rate mortgage is, and how it may benefit you. We'll then look at using a mortgage overpayment calculator. From definite security with the fixed rate mortgage to potential cash saved with the overpayment calculator.
There are a few different types of mortgage, the fixed rate being only one of them. You get a fixed interest period for several years. Your interest rate, and therefore your payments are fixed.
Do fixed rate mortgages have any plus points? Because your payments stay the same you don't get ups and downs in your monthly payments. You get to budget easier every month as your payments remain the same.
If the bank base interest rate starts to rise, yours will stay as it is. In our recent history there have been some frightening short term interest rate rises. People on variable rate mortgages are much more likely to be affected by rapid rises in interest rates.
A fixed rate mortgage could be a mistake for you under certain circumstances. If you think you may move home, or even have another child and need an extra bedroom, then think carefully before taking a fixed rate mortgage. Any situation which sees you changing mortgage can invoke a horrid redemption penalty on you.
Most fixed rate mortgages come tied to a nasty redemption penalty. These redemption penalties can hit you hard just when you don't need it. There is never a good time to be hit with extra charges so think carefully before taking the fixed rate mortgage.
You might like to think about paying a small extra overpayment each month as you go through the length of your mortgage. You may not realise but you can pay any amount over the minimum monthly payment. You lender will not tell you it's possible to pay extra as they prefer you just pay the minimum.
What benefit does paying a bit extra each month have on you and your mortgage? Topping up your monthly minimum payment means you can knock a few years of the length of your mortgage. Not only do you save years but you save piles of cash, usually many thousands.
What do you do with a mortgage overpayment calculator? You input various figures relating to your mortgage. You then enter any extra amount you can afford to pay. Or enter various value for fun.
The calculator will then tell you how many years you might reduce your mortgage by. It also gives you a figure in cash that you can expect to save. Playing around with the actual overpayment figure can reveal that the more you can pay, the faster you finish your mortgage.
You might be pleasantly surprised at the savings to be made. If you had a 25 year mortgage and borrowed 100 grand at 5% interest. Making an overpayment of 50 every month will save you 12,000 and knock over 3 years off.
That example is paying just 50 extra every month. What if you could afford 100 a month to overpay? The same mortgage example but paying 100 extra every month. You can knock a staggering 6 years or more off the length and save yourself in the region of 20 thousand.
Another plus point is the years you knock off are totally payment free. You could be free of the shackles of your mortgage early by paying a little more now. You won't hear this info from any lenders though. You need to discover info like this for yourself.
If we go back to the extra 100 each month where we managed to shave six years off. You pay nothing more for the last 6 years of the term, which equates to about another 40 grand saved. You don't pay this money to your lender so you get to keep it, either save it or spend it.
In conclusion we listed a few benefits of a fixed rate mortgage. Every month you pay the same so you get to sleep easy at night knowing this. Also consider the huge potential in making a little overpayment every month. Even small amounts will add up.
There are a few different types of mortgage, the fixed rate being only one of them. You get a fixed interest period for several years. Your interest rate, and therefore your payments are fixed.
Do fixed rate mortgages have any plus points? Because your payments stay the same you don't get ups and downs in your monthly payments. You get to budget easier every month as your payments remain the same.
If the bank base interest rate starts to rise, yours will stay as it is. In our recent history there have been some frightening short term interest rate rises. People on variable rate mortgages are much more likely to be affected by rapid rises in interest rates.
A fixed rate mortgage could be a mistake for you under certain circumstances. If you think you may move home, or even have another child and need an extra bedroom, then think carefully before taking a fixed rate mortgage. Any situation which sees you changing mortgage can invoke a horrid redemption penalty on you.
Most fixed rate mortgages come tied to a nasty redemption penalty. These redemption penalties can hit you hard just when you don't need it. There is never a good time to be hit with extra charges so think carefully before taking the fixed rate mortgage.
You might like to think about paying a small extra overpayment each month as you go through the length of your mortgage. You may not realise but you can pay any amount over the minimum monthly payment. You lender will not tell you it's possible to pay extra as they prefer you just pay the minimum.
What benefit does paying a bit extra each month have on you and your mortgage? Topping up your monthly minimum payment means you can knock a few years of the length of your mortgage. Not only do you save years but you save piles of cash, usually many thousands.
What do you do with a mortgage overpayment calculator? You input various figures relating to your mortgage. You then enter any extra amount you can afford to pay. Or enter various value for fun.
The calculator will then tell you how many years you might reduce your mortgage by. It also gives you a figure in cash that you can expect to save. Playing around with the actual overpayment figure can reveal that the more you can pay, the faster you finish your mortgage.
You might be pleasantly surprised at the savings to be made. If you had a 25 year mortgage and borrowed 100 grand at 5% interest. Making an overpayment of 50 every month will save you 12,000 and knock over 3 years off.
That example is paying just 50 extra every month. What if you could afford 100 a month to overpay? The same mortgage example but paying 100 extra every month. You can knock a staggering 6 years or more off the length and save yourself in the region of 20 thousand.
Another plus point is the years you knock off are totally payment free. You could be free of the shackles of your mortgage early by paying a little more now. You won't hear this info from any lenders though. You need to discover info like this for yourself.
If we go back to the extra 100 each month where we managed to shave six years off. You pay nothing more for the last 6 years of the term, which equates to about another 40 grand saved. You don't pay this money to your lender so you get to keep it, either save it or spend it.
In conclusion we listed a few benefits of a fixed rate mortgage. Every month you pay the same so you get to sleep easy at night knowing this. Also consider the huge potential in making a little overpayment every month. Even small amounts will add up.
About the Author:
Monty Burn was head honcho at the Voluntary Mortgage Regulator until they sacked him for helping the regular guy on the street save money. Find out how to get a top fixed rate mortgage deal at his site. You could also try our overpayment calculator on your mortgage and see what you could save.
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