We’ll discover what the fixed rate mortgage is, and its benefits. We’ll also take a peek at how much you could save with an 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 a fixed interest period for several years. If the interest rate remains static, so do your monthly payments.
What are the advantages of a fixed rate mortgage? Because your payments stay the same you don’t get ups and downs in your monthly payments. It’s a lot easier to plan financially knowing your payment will be the same.
It doesn’t matter how much interest rates rise, your payments are fixed. In the last few decades we have seen interest rates almost double in a few short months. People on variable rate mortgages are much more likely to be affected by rapid rises in interest rates.
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. 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.
A consideration during your mortgage term is to pay a bit extra each month on top of your normal payment. You may not realise but you can pay any amount over the minimum monthly payment. You lender will not tell you it’s possible to pay extra as they prefer you just pay the minimum.
What are the best reasons to paying a bit extra every month? Topping up your monthly minimum payment means you can knock a few years of the length of your mortgage. You can save a shedload of cash as well as knock a few years off.
What do you do with a mortgage overpayment calculator? 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 to see what sort of length in years you can knock off. It also gives you a figure in cash that you can expect to save. Playing around with the actual overpayment figure can reveal that the more you can pay, the faster you finish your mortgage.
You may be amazed by how much you could save. If you had a 25 year mortgage and borrowed 100 grand at 5% interest. Making an overpayment of 50 every month will save you 12,000 and knock over 3 years off.
The last example was an overpayment of 50 every month, but what happens if you pay 100 extra. The same mortgage example but paying 100 extra every month. You can save 20 thousand in cash. You can also shorten your mortgage by more than 6 years.
An extra benefit is the years you save are free from any payment whatsoever. By paying a little extra now, you could easily be mortgage free well before you ever expected. You never get info like this from your lender. This sort of stuff is kept quiet by the industry.
If we go back to the extra 100 each month where we managed to shave six years off. This shortening of the mortgage by six years saves you another 40,000 or more. You can do what you like with this extra as it never needs to be paid to your lender.
There you have a few benefits of going for a fixed rate mortgage. You get to sleep easy in the knowledge your payment will stay the same month after month. 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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