We'll have a look at what benefits there are to a fixed rate mortgage for you. We'll then look at using 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. A fixed period of interest that may be a couple or several years. Because the interest rate is fixed, so are your monthly payments.
What, if any, are the up sides to fixed rate mortgages? Your payment is fixed because your particular interest rate is fixed. You get to budget easier every month as your payments remain the same.
It doesn't matter how much interest rates rise, your payments are fixed. In our recent history there have been some frightening short term interest rate rises. People on variable rate mortgages are much more likely to be affected by rapid rises in interest rates.
A fixed rate mortgage could be a mistake for you under certain circumstances. You may decide you need to move house, or even have an unexpected child and simply need more room. Either of these events will cause you to trigger an unwanted redemption penalty.
Nearly all fixed rate mortgages have a redemption penalty attached. These redemption penalties can hit you hard just when you don't need it. You must think twice before agreeing to a fixed rate deal if a charge like this will badly affect you.
One thing to consider while having the mortgage is to pay a bit extra every month if you can afford it. It's not set in stone that you have to pay the same minimum amount every month. Lenders prefer you to make payments like this but they never inform you that you could pay extra if you wish.
What are the best reasons to paying a bit extra every month? If you consistently pay extra in the early years of your agreement you can knock several years off the length. By paying a bit extra now, the savings mount up substantially later on.
What does a mortgage overpayment calculator do? It uses figures from your mortgage. Amount, interest rate, length of term etc. You can put various amounts in as the overpayment. Feel free to play around with this figure.
The calculator will then tell you how many years you might reduce your mortgage by. You get to see how much money you could possibly save. The figures in years and cash saved will increase the more you overpay each month.
You may be surprised at some of the savings you can make. Quick example, 25 year mortgage borrowing 100,000 at 5%. If you pay an extra fifty each month, you can shave more than 3 years off the length and save 12,000 in interest payments.
Now an example of 100 extra instead of 50 extra. Paying 100 extra every month using the same example mortgage. In this new example the time saved is over six years and the financial saving is more than twenty thousand.
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. Lenders will not tell you this, they like to keep this a secret.
In the example where we paid an extra 100 every month and shortened the mortgage by six years. We could save a further 40 thousand by not having to pay your lender every month. You don't pay this money to your lender so you get to keep it, either save it or spend it.
We've looked at some of the advantages of a fixed rate mortgage. You get to sleep easy in the knowledge your payment will stay the same month after month. Also consider the huge potential in making a little overpayment every month. Even small amounts will add up.
A fixed rate mortgage is one of the various types available. A fixed period of interest that may be a couple or several years. Because the interest rate is fixed, so are your monthly payments.
What, if any, are the up sides to fixed rate mortgages? Your payment is fixed because your particular interest rate is fixed. You get to budget easier every month as your payments remain the same.
It doesn't matter how much interest rates rise, your payments are fixed. In our recent history there have been some frightening short term interest rate rises. People on variable rate mortgages are much more likely to be affected by rapid rises in interest rates.
A fixed rate mortgage could be a mistake for you under certain circumstances. You may decide you need to move house, or even have an unexpected child and simply need more room. Either of these events will cause you to trigger an unwanted redemption penalty.
Nearly all fixed rate mortgages have a redemption penalty attached. These redemption penalties can hit you hard just when you don't need it. You must think twice before agreeing to a fixed rate deal if a charge like this will badly affect you.
One thing to consider while having the mortgage is to pay a bit extra every month if you can afford it. It's not set in stone that you have to pay the same minimum amount every month. Lenders prefer you to make payments like this but they never inform you that you could pay extra if you wish.
What are the best reasons to paying a bit extra every month? If you consistently pay extra in the early years of your agreement you can knock several years off the length. By paying a bit extra now, the savings mount up substantially later on.
What does a mortgage overpayment calculator do? It uses figures from your mortgage. Amount, interest rate, length of term etc. You can put various amounts in as the overpayment. Feel free to play around with this figure.
The calculator will then tell you how many years you might reduce your mortgage by. You get to see how much money you could possibly save. The figures in years and cash saved will increase the more you overpay each month.
You may be surprised at some of the savings you can make. Quick example, 25 year mortgage borrowing 100,000 at 5%. If you pay an extra fifty each month, you can shave more than 3 years off the length and save 12,000 in interest payments.
Now an example of 100 extra instead of 50 extra. Paying 100 extra every month using the same example mortgage. In this new example the time saved is over six years and the financial saving is more than twenty thousand.
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. Lenders will not tell you this, they like to keep this a secret.
In the example where we paid an extra 100 every month and shortened the mortgage by six years. We could save a further 40 thousand by not having to pay your lender every month. You don't pay this money to your lender so you get to keep it, either save it or spend it.
We've looked at some of the advantages of a fixed rate mortgage. You get to sleep easy in the knowledge your payment will stay the same month after month. Also consider the huge potential in making a little overpayment every month. Even small amounts will add up.
About the Author:
The Voluntary Mortgage Regulator got rid of Monty as chief because he was actually saving punters too much cash! Find out how to get the 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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