We’ll have a look at what benefits there are to a fixed rate mortgage for you. Then prepare to be amazed at the savings made with a mortgage overpayment calculator. The fixed rate gives you security for a while & the overpayment calculator might give you a pleasant surprise.
Of the various types of mortgage available, the fixed rate is only one of them. 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.
Do fixed rate mortgages have any plus points? Your payment is fixed because your particular interest rate is fixed. You can plan your monthly spending easier knowing your mortgage won’t go up unexpectedly.
Your payment is locked so it really doesn’t matter what the general rates are doing. There have been some alarming short term interest rate rises in our recent history. If the rates rose drastically over a short term those on variable mortgages could struggle to meet payments.
Under certain circumstances, a fixed rate mortgage could be a mistake. Moving home in the next year or so. Having a planned or even unplanned child can be reasons to avoid fixed rate mortgages. 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. You can get hit with a nasty charge when you are least expecting 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. It’s not set in stone that you have to pay the same minimum amount every month. You lender will not tell you it’s possible to pay extra as they prefer you just pay the minimum.
Are there any advantages to paying a bit extra each month? If you consistently pay extra in the early years of your agreement you can knock several years off the length. Not only do you save years, you can also save thousands and thousands of your hard earned money.
What do you do with a mortgage overpayment calculator? You input various figures relating to your mortgage. You can enter a figure that you may think about paying as an extra payment each month.
The calculator tells you how many years you will knock off. You get the expectant cash saving as well. If you play around with the overpayment figure you can see that the more you overpay the more you save, in cash and years.
Some of the savings can be staggering. If you borrowed a hundred thousand at five percent over twenty five years. You could save over twelve thousand and shorten the mortgage by more than 3 years just by paying an extra 50 each month.
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. This saves you more than 20,000 and knocks a respectable 6 years off the term.
Another plus point is the years you knock off are totally payment free. It’s definitely a reality for you to be free of your mortgage years before planned. Lenders will not tell you this, they like to keep this a secret.
If we go back to the extra 100 each month where we managed to shave six years off. No payments for 6 years means another 40 thousand saved in monthly payments. This is 40 grand in your pocket and not your lenders. Overpaying is difficult, make no mistake, but the rewards can be amazing.
There you have a few benefits of going for 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.
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