We’ll have a look at what benefits there are to a fixed rate mortgage for you. We’ll then take a look at an overpayment calculator for your mortgage. With the fixed rate mortgage comes security. With the mortgage overpayment calculator comes potential savings.
Of the various types of mortgage available, the fixed rate is only one of them. The interest rate is fixed, usually for a number of years. If the interest rate remains static, so do your monthly payments.
Do fixed rate mortgages have any plus points? Your payment is fixed because your particular interest rate is fixed. You can estimate your outgoings simpler knowing your monthly payment is fixed.
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. Being on a variable rate leaves you susceptible to the rapid rise of your monthly payment.
There can be certain circumstances when a fixed rate mortgage may not be right for you. If you suddenly have an extra family member and need more space. Or you are simply considering moving home soon. These types of situations could invoke a nasty redemption penalty on your fixed rate mortgage.
Fixed rate mortgages nearly always come bundled with a redemption penalty. These redemption penalties can hit you hard just when you don’t need it. There is never a excellent time to be hit with extra charges so reckon carefully before taking the fixed rate mortgage.
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.
Are there any advantages to paying a bit extra each month? You can easily shave years of your mortgage. Be debt free much earlier. You also save a lot of money in the process, sometimes a staggering amount.
How do you use a mortgage overpayment calculator? You input various figures relating to your mortgage. 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.
Some of the savings can be staggering. 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? We’ll use the same mortgage example figures but pay 100 extra. In this new example the time saved is over six years and the financial saving is more than twenty thousand.
One more advantage is that the years you save are payment free, nothing at all to pay. Being mortgage free a few years early could easily be achieved by paying a bit extra now. Of course your lender will never tell you this, you have to learn this on your own.
If we revisit the example where we knocked more than six years off the mortgage. This shortening of the mortgage by six years saves you another 40,000 or more. This saving is yours as you will never need to give it to your lender as you originally plotted.
To recap we had a look at what benefit a fixed rate mortgage has for you. You get a excellent night’s sleep and regular level payments. Also consider the huge potential in making a small overpayment every month. Even small amounts will add up.