Well take a look at fixed rate mortgages and how they can be good for you. We’ll also take a peek at how much you could save with an overpayment calculator. Security comes with the fixed rate mortgage, whereas huge savings can come with the overpayment calculator.
A fixed rate mortgage is a special type of mortgage where you have a fixed interest period. The interest rate is fixed, usually for a number of years. If the interest rate remains static, so do your monthly payments.
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.
There can be certain circumstances when a fixed rate mortgage may not be right for you. 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.
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.
It’s worth thinking about paying a bit extra each month in addition to whatever you normally pay. You don’t have to make the same payment month after month for 25 years. It’s not often, if at all, that a lender will tell you it’s possible to pay more than your normal minimum monthly payment.
What are the up sides to paying extra each and every month? You can easily shave years of your mortgage. Be debt free much earlier. Not only do you save years but you save piles of cash, usually many thousands.
In what way does a mortgage overpayment calculator 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.
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.
You may be surprised at some of the savings you can make. 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.
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.
An extra advantage is you won’t have any payments to make during the last few years of the mortgage. By paying a little extra now, you could easily be mortgage free well before you ever expected. You won’t hear this info from any lenders though. You need to discover info like this for yourself.
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.
We’ve looked at some of the advantages of a fixed rate mortgage. Not only do you get set monthly payments, you get to sleep easy at night because of it. We also looked into the future and saw some big savings if you can make a little overpayment now.
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