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. You get security from the fixed rate mortgage & you may get a nice surprise from the overpayment calculator.
A fixed rate mortgage is one of the various types available. You get your interest rate locked for the period of the deal, usually a few years. The interest rate you pay is locked; therefore your monthly payments are also locked.
Do fixed rate mortgages have any plus points? 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.
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. People on variable rate mortgages are much more likely to be affected by rapid rises in interest rates.
There can be certain circumstances when a fixed rate mortgage may not be right for you. 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. Any situation which sees you changing mortgage can invoke a horrid redemption penalty on you.
Fixed rate mortgages usually come with charges called redemption penalties. You can get hit with a nasty charge when you are least expecting it. If a charge like this will hurt you then you must think very carefully before taking a fixed rate mortgage.
A consideration during your mortgage term is to pay a bit extra each month on top of your normal payment. You don’t have to make the same payment month after month for 25 years. You lender will not tell you it’s possible to pay extra as they prefer you just pay the minimum.
If you do pay extra each month, are there any benefits to this? You can shave several years off your mortgage term by paying slightly more each month. Not only do you save years, you can also save thousands and thousands of your hard earned money.
In what way does a mortgage overpayment calculator work? It uses figures from your mortgage. Amount, interest rate, length of term etc. You can enter a figure that you may think about paying as an extra payment each month.
You get to see what sort of length in years you can knock off. It will tell you what sort of cash lump sum you can expect to save 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.
There are astonishing amounts of savings to be had. Quick example, 25 year mortgage borrowing 100,000 at 5%. By paying an extra fifty each month could save you over 3 years and 12 thousand.
Now an example of 100 extra instead of 50 extra. 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 benefit is the years you save are free from any payment whatsoever. 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 our example where we saved six years off the length with a hundred a month overpayment. We could save a further 40 thousand by not having to pay your lender every month. This saving is yours as you will never need to give it to your lender as you originally planned.
In this article we’ve looked at the potential of fixed rate mortgages. Every month you pay the same so you get to sleep easy at night knowing this. 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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