We'll discover what the fixed rate mortgage is, and its benefits. Then prepare to be amazed at the savings made with a mortgage overpayment calculator. You get security from the fixed rate mortgage & you may get a nice surprise from the overpayment calculator.
A fixed rate mortgage is a special type of mortgage where you have a fixed interest period. Usually for a period of several years, you get a fixed rate of interest. Locked in interest rates mean locked in monthly payments.
What are the fixed rate mortgage good points? Because your payments stay the same you don't get ups and downs in your monthly payments. You can plan your monthly spending easier knowing your mortgage won't go up unexpectedly.
Bank base rates may rise drastically, however yours will be the same because it's fixed. In the not too distant past there have been some real scary rate rises. Being on a variable rate leaves you susceptible to the rapid rise of your monthly payment.
There are a few situations when a fixed rate mortgage may be a bad decision. The arrival of a new child could mean you need a bigger home and need to move. These are reasons to avoid fixed rate mortgages. Any sort of situation like this can cause unexpected charges by way of redemption penalties.
Fixed rate mortgages nearly always come bundled with a 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.
During the term of your mortgage it's worth considering paying a bit extra each month if your budget will stretch. You don't have to make the same payment month after month for 25 years. You lender will prefer you make the minimum payment and will never tell you it's possible to pay extra.
What are the best reasons to paying a bit extra every month? If you consistently pay extra in the early years of your agreement you can knock several years off the length. By paying a bit extra now, the savings mount up substantially later on.
What does a mortgage overpayment calculator do? You can enter all the relevant figures from your particular deal. You can enter a figure that you may think about paying as an extra payment each month.
You get a resulting figure out of the calculator in years you can shave off. It also tells you what sort of financial saving you can expect to make. Playing around with the actual overpayment figure can reveal that the more you can pay, the faster you finish your mortgage.
Some of the savings can be staggering. If you had a 25 year mortgage and borrowed 100 grand at 5% interest. By paying an extra fifty each month could save you over 3 years and 12 thousand.
Nice savings on a 50 extra payment. But what happens if you pay an extra 100 though? Paying 100 extra every month using the same example mortgage. You can save 20 thousand in cash. You can also shorten your mortgage by more than 6 years.
One more advantage is that the years you save are payment free, nothing at all to pay. Being mortgage free a few years early could easily be achieved by paying a bit extra now. Of course your lender will never tell you this, you have to discover this on your own.
If we go back to the extra 100 each month where we managed to shave six years off. A six year saving translates into about a forty grand saving in cash. You can do what you like with this extra as it never needs to be paid to your lender.
In this article we've looked at the potential of fixed rate mortgages. You get to sleep easy in the knowledge your payment will stay the same month after month. We also had a look at a mortgage overpayment calculator and the potential savings that can be had.