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. You get security from the fixed rate mortgage & you may get a nice surprise from the overpayment calculator.
Fixed rate mortgages are one of a few different types of mortgage available. You get your interest rate locked for the period of the deal, usually a few years. Your interest rate, and therefore your payments are fixed.
What, if any, are the up sides to fixed rate mortgages? A fixed rate of interest means a fixed monthly mortgage payment. It's a lot easier to plan financially knowing your payment will be the same.
No matter what the average interest rate is, your rate will stay the same. In our recent history there have been some frightening short term interest 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. If you suddenly have an extra family member and need more space. Or you are simply considering moving home soon. These types of situations could invoke a nasty redemption penalty on your fixed rate mortgage.
A redemption penalty is a charge that almost always comes with a fixed rate deal. You can get hit with a nasty charge when you are least expecting it. You must think twice before agreeing to a fixed rate deal if a charge like this will badly affect you.
It's worth thinking about paying a bit extra each month in addition to whatever you normally pay. You may have a fixed rate but it doesn't mean your payments have to be fixed if you can afford extra. You lender will prefer you make the minimum payment and will never tell you it's possible to pay extra.
What benefit does paying a bit extra each month have on you and your mortgage? You can easily shave years of your mortgage. Be debt free much earlier. You also save a lot of money in the process, sometimes a staggering amount.
How do you use a mortgage overpayment calculator? You enter your mortgage details. The amount borrowed, the length, the interest rate etc. You can then play around by changing the figure you can afford to overpay.
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 may be amazed by how much you could save. As an example, borrow 100,000 at 5% over 25 years. Just by paying an extra 50 every month could see you knock over 3 years off and save over 12 grand.
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. This saves you more than 20,000 and knocks a respectable 6 years off the term.
Another benefit is that for the last few years of the original (25 year) term, you don't pay anything. Being mortgage free a few years early could easily be achieved by paying a bit extra now. 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 saving is yours as you will never need to give it to your lender as you originally planned.
In conclusion we listed a few benefits of a fixed rate mortgage. Regular payments and a good night sleep. We also had a look at the savings to be made by paying a bit extra every month. It all adds up.
Fixed rate mortgages are one of a few different types of mortgage available. You get your interest rate locked for the period of the deal, usually a few years. Your interest rate, and therefore your payments are fixed.
What, if any, are the up sides to fixed rate mortgages? A fixed rate of interest means a fixed monthly mortgage payment. It's a lot easier to plan financially knowing your payment will be the same.
No matter what the average interest rate is, your rate will stay the same. In our recent history there have been some frightening short term interest 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. If you suddenly have an extra family member and need more space. Or you are simply considering moving home soon. These types of situations could invoke a nasty redemption penalty on your fixed rate mortgage.
A redemption penalty is a charge that almost always comes with a fixed rate deal. You can get hit with a nasty charge when you are least expecting it. You must think twice before agreeing to a fixed rate deal if a charge like this will badly affect you.
It's worth thinking about paying a bit extra each month in addition to whatever you normally pay. You may have a fixed rate but it doesn't mean your payments have to be fixed if you can afford extra. You lender will prefer you make the minimum payment and will never tell you it's possible to pay extra.
What benefit does paying a bit extra each month have on you and your mortgage? You can easily shave years of your mortgage. Be debt free much earlier. You also save a lot of money in the process, sometimes a staggering amount.
How do you use a mortgage overpayment calculator? You enter your mortgage details. The amount borrowed, the length, the interest rate etc. You can then play around by changing the figure you can afford to overpay.
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 may be amazed by how much you could save. As an example, borrow 100,000 at 5% over 25 years. Just by paying an extra 50 every month could see you knock over 3 years off and save over 12 grand.
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. This saves you more than 20,000 and knocks a respectable 6 years off the term.
Another benefit is that for the last few years of the original (25 year) term, you don't pay anything. Being mortgage free a few years early could easily be achieved by paying a bit extra now. 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 saving is yours as you will never need to give it to your lender as you originally planned.
In conclusion we listed a few benefits of a fixed rate mortgage. Regular payments and a good night sleep. We also had a look at the savings to be made by paying a bit extra every month. It all adds up.
About the Author:
Grab a FREE copy of Monty's Mortgage Bible, the book that caused the Voluntary Mortgage Regulator to sack him. Discover your best fixed rate mortgage deal. Maybe have a play with our mortgage overpayment calculator and shock yourself at how much cash you could save.
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