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.
Fixed rate mortgages are one of a few different types of mortgage available. You get a fixed interest period for several years. Your interest rate, and therefore your payments are fixed.
Do fixed rate mortgages have any plus points? Your payment is fixed because your particular interest rate is fixed. You can plot your monthly spending simpler knowing your mortgage won’t go up unexpectedly.
Bank base rates may rise drastically, but yours will be the same because it’s fixed. In the not too distant past there have been some real scary rate rises. A rapid rise over a year or so could really see payments rise for those on standard variable mortgages.
There are a few situations when a fixed rate mortgage may be a terrible choice. If you reckon you may go home, or even have another child and need an extra bedroom, then reckon carefully before taking a fixed rate mortgage. Either of these events will cause you to trigger an unwanted redemption penalty.
Fixed rate mortgages nearly always come bundled with a redemption penalty. At a time when you least need it, you could get hit with a redemption penalty. Reckon hard before you take a fixed rate mortgage as these charges can really disrupt your plans.
A consideration during your mortgage term is to pay a bit extra each month on top of your normal payment. You may have a fixed rate but it doesn’t mean your payments have to be fixed if you can afford extra. Lenders prefer you to make payments like this but they never inform you that you could pay extra if you wish.
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.
How do you use a mortgage overpayment calculator? You can enter all the relevant figures from your particular deal. You can then play around by changing the figure you can afford to overpay.
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 quicker you end 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.
Another plus point is the years you knock off are really payment free. It’s certainly a reality for you to be free of your mortgage years before plotted. 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 hard, make no mistake, but the rewards can be incredible.
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 simple at night because of it. We also looked into the future and saw some huge savings if you can make a small overpayment now.