We’ll learn what the fixed rate mortgage is, and its benefits. We will also look into how a mortgage overpayment calculator might save you lots of cash. With the fixed rate mortgage comes security. With the mortgage overpayment calculator comes potential savings.
A fixed rate mortgage is a special type of mortgage where you have a fixed interest period. A fixed period of interest that may be a couple or several years. If the interest rate remains static, so do your monthly payments.
What are the advantages of a fixed rate mortgage? Your payment is fixed because your particular interest rate is fixed. You can estimate your outgoings simpler 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. You may struggle to meet your payments if you have a variable mortgage and rates rise suddenly.
Under certain circumstances, a fixed rate mortgage could be a mistake. Moving home in the next year or so. Having a plotted or even unplanned child can be reasons to avoid fixed rate mortgages. 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. There is never a excellent time to be hit with extra charges so reckon 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. 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? You can easily shave years of your mortgage. Be debt free much earlier. 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 enter your mortgage details. The amount borrowed, the length, the interest rate etc. You can place various amounts in as the overpayment. Feel free to play around with this figure.
You get a resulting figure out of the calculator in years you can shave off. 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. If you had a 25 year mortgage and borrowed 100 grand at 5% interest. You could save over twelve thousand and shorten the mortgage by more than 3 years just by paying an extra 50 each month.
Nice savings on a 50 extra payment. But what happens if you pay an extra 100 though? We’ll use the same mortgage example figures but pay 100 extra. You can knock a staggering 6 years or more off the length and save yourself in the region of 20 thousand.
Another plus point is the years you knock off are really payment free. By paying a small 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.
If we look at the example where we paid 100 extra and knocked over 6 years off the length. We could save a further 40 thousand by not having to pay your lender every month. 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. Regular payments and a excellent night sleep. We also looked at potential savings by paying extra each month. Every small helps.