We’ll have a look at what benefits there are to a fixed rate mortgage for you. 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.
Fixed rate mortgages are one of a few different types of mortgage available. Usually for a period of several years, you get a fixed rate of interest. Your interest rate, and therefore your payments are fixed.
Are there any benefits to a fixed rate mortgage? Because your payments stay the same you don’t get ups and downs in your monthly payments. You can benefit by knowing your monthly payment is fixed which allows you to budget more effectively.
It doesn’t matter how much interest rates rise, your payments are 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.
Under certain circumstances, a fixed rate mortgage could be a mistake. 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.
Fixed rate mortgages usually come with charges called redemption penalties. These redemption penalties can hit you hard just when you don’t need it. These unexpected charges can hurt. Consider carefully whether a fixed rate is the one for you.
During the term of your mortgage it’s worth considering paying a bit extra each month if your budget will stretch. You don’t have to make the same payment month after month for 25 years. It’s not often, if at all, that a lender will tell you it’s possible to pay more than your normal minimum monthly payment.
What benefit does paying a bit extra each month have on you and your mortgage? You can shave several years off your mortgage term by paying slightly more each month. You can save a shedload of cash as well as knock a few years off.
What do you do with 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. Putting larger figures in the overpayment box will show larger savings and even more time saved.
You might be pleasantly surprised at the savings to be made. Quick example, 25 year mortgage borrowing 100,000 at 5%. By paying an extra fifty each month could save you over 3 years and 12 thousand.
Now an example of 100 extra instead of 50 extra. Using the same figures in the mortgage but substituting 100 extra for the previous 50 extra. 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. Of course your lender will never tell you this, you have to learn this on your own.
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. You don’t pay this money to your lender so you get to keep it, either save it or spend it.
There you have a few benefits of going for a fixed rate mortgage. Not only do you get set monthly payments, you get to sleep simple at night because of it. Also consider the huge potential in making a small overpayment every month. Even small amounts will add up.