Fixed Rate Mortgage Could Get You A Good Nights Sleep

We’ll discover what the fixed rate mortgage is, and its benefits. We’ll also take a peek at how much you could save with an overpayment calculator. The fixed rate gives you security for a while & the overpayment calculator might give you a pleasant surprise.

A fixed rate mortgage is one of the various types available. Usually for a period of several years, you get a fixed rate of interest. The interest rate you pay is locked; therefore your monthly payments are also locked.

Are there any benefits to a fixed rate mortgage? No need to worry about fluctuating interest rates. Your rate and your payments are fixed. You can estimate your outgoings easier knowing your monthly payment is fixed.

Bank base rates may rise drastically, however yours will be the same because it’s fixed. In the last few decades we have seen interest rates almost double in a few short months. 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. 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. Either of these events will cause you to trigger an unwanted redemption penalty.

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. Think hard before you take a fixed rate mortgage as these charges can really disrupt your plans.

One thing to consider while having the mortgage is to pay a bit extra every month if you can afford it. You may not realise but you can pay any amount over the minimum monthly payment. You lender will prefer you make the minimum payment and will never tell you it’s possible to pay extra.

What are the up sides to paying extra each and every month? The extra payments reduce the sum owed quicker and the result is you save years off the term of your deal. You also save a lot of money in the process, sometimes a staggering amount.

How do you use a mortgage overpayment calculator? Enter all the figures that relate to your mortgage. You also enter a figure that you want to overpay. You can play around with this figure.

The calculator will then tell you how many years you might reduce your mortgage by. You get the expectant cash saving as well. The figures in years and cash saved will increase the more you overpay each month.

There are astonishing amounts of savings to be had. If you borrowed a hundred thousand at five percent over twenty five years. Making an overpayment of 50 every month will save you 12,000 and knock over 3 years off.

The last example was an overpayment of 50 every month, but what happens if you pay 100 extra. Using the same figures in the mortgage but substituting 100 extra for the previous 50 extra. This saves you more than 20,000 and knocks a respectable 6 years off the term.

An extra advantage is you won’t have any payments to make during the last few years of the mortgage. It’s definitely a reality for you to be free of your mortgage years before planned. You won’t hear this info from any lenders though. You need to discover info like this for yourself.

In our example where we saved six years off the length with a hundred a month overpayment. No payments for 6 years means another 40 thousand saved in monthly payments. This is money you can spend or save as it’s not going to your lender every month.

To recap we had a look at what benefit a fixed rate mortgage has for you. Not only do you get set monthly payments, you get to sleep easy at night because of it. We also looked at potential savings by paying extra each month. Every little helps.

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