Is A Fixed Rate Mortgage Your Friend Or Your Foe?

We’ll discover what the fixed rate mortgage is, and its benefits. We will also look into how a mortgage overpayment calculator might save you lots of cash. With the fixed rate mortgage comes security. With the mortgage overpayment calculator comes potential savings.

A fixed rate mortgage is a special type of mortgage where you have a fixed interest period. A fixed period of interest that may be a couple or several years. If the interest rate remains static, so do your monthly payments.

Do fixed rate mortgages have any plus points? No need to worry about fluctuating interest rates. Your rate and your payments are fixed. You get to budget easier every month as your payments remain the same.

It doesn’t matter how much interest rates rise, your payments are fixed. In our lifetime we have already seen some distressing interest rate rises. You may struggle to meet your payments if you have a variable mortgage and rates rise suddenly.

There is a situation when maybe you should think twice about a fixed rate mortgage. You may decide you need to move house, or even have an unexpected child and simply need more room. In situations like these you may need to redeem the mortgage and pay a hefty redemption penalty on the fixed rate mortgage.

Nearly all fixed rate mortgages have a redemption penalty attached. You can get hit with a nasty charge when you are least expecting it. These unexpected charges can hurt. Consider carefully whether a fixed rate is the one for you.

During the term of your mortgage it’s worth considering paying a bit extra each month if your budget will stretch. It’s not set in stone that you have to pay the same minimum amount every month. The lenders would love you to do this but they will rarely tell you that you can indeed pay extra.

Are there any advantages to paying a bit extra each month? You can easily shave years of your mortgage. Be debt free much earlier. Not only do you save years, you can also save thousands and thousands of your hard earned money.

How do overpayment calculators work? 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. It will tell you what sort of cash lump sum you can expect to save as well. Both the years and cash saved obviously increase if you put in a higher overpayment figure.

You might be pleasantly surprised at the savings to be made. Quick example, 25 year mortgage borrowing 100,000 at 5%. Just by paying an extra 50 every month could see you knock over 3 years off and save over 12 grand.

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 get to shave over 6 years off the length and over 20 grand saved. That’s pretty good.

An extra advantage is you won’t have any payments to make during the last few years of the mortgage. 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.

In the example where we paid an extra 100 every month and shortened the mortgage by six years. No payments for 6 years means another 40 thousand saved in monthly payments. You can do what you like with this extra as it never needs to be paid to your lender.

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.

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