We are going to investigate what a fixed rate mortgage can do for you. We’ll also take a peek at how much you could save with an overpayment calculator. Security comes with the fixed rate mortgage, whereas huge savings can come with the overpayment calculator.
A fixed rate mortgage is a special type of mortgage where you have a fixed interest period. The interest rate is fixed, usually for a number of years. The interest rate you pay is locked; therefore your monthly payments are also locked.
Do fixed rate mortgages have any plus points? You benefit by not having the yo-yo effect on your monthly payments. They stay the same every month. You can plan your monthly spending easier knowing your mortgage won’t go up unexpectedly.
Bank base rates may rise drastically, however yours will be the same because it’s fixed. There have been some alarming short term interest rate rises in our recent history. If the rates rose drastically over a short term those on variable mortgages could struggle to meet payments.
A fixed rate mortgage could be a mistake for you under certain circumstances. Moving home in the next year or so. Having a planned or even unplanned child can be reasons to avoid fixed rate mortgages. These types of situations could invoke a nasty redemption penalty on your fixed rate mortgage.
Most fixed rate mortgages come tied to a nasty redemption penalty. These charges can be pretty steep, and come at a time when you don’t need the extra stress. Think 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. It’s not set in stone that you have to pay the same minimum amount every month. The lenders would love you to do this but they will rarely tell you that you can indeed pay extra.
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. Not only do you save years, you can also save thousands and thousands of your hard earned money.
What do you do with a mortgage overpayment calculator? It uses figures from your mortgage. Amount, interest rate, length of term etc. You also enter a figure that you want to overpay. You can play around with this figure.
You get to see what sort of length in years you can knock off. It will tell you what sort of cash lump sum you can expect to save as well. Putting bigger figures in the overpayment box will show bigger savings and even more time saved.
You might be pleasantly surprised at the savings to be made. If you borrowed a hundred thousand at five percent over twenty five years. Just by paying an extra 50 every month could see you knock over 3 years off and save over 12 grand.
If you can afford to pay 100 extra instead of 50 what would happen? Using the same figures in the mortgage but substituting 100 extra for the previous 50 extra. In this new example the time saved is over six years and the financial saving is more than twenty thousand.
Another benefit is that for the last few years of the original (25 year) term, you don’t pay anything. By paying a little extra now, you could easily be mortgage free well before you ever expected. You never get info like this from your lender. This sort of stuff is kept quiet by the industry.
If we go back to the extra 100 each month where we managed to shave six years off. This shortening of the mortgage by six years saves you another 40,000 or more. This is 40 grand in your pocket and not your lenders. Overpaying is difficult, make no mistake, but the rewards can be amazing.
There you have a few benefits of going for a fixed rate mortgage. Regular payments and a good night sleep. We also had a look at a mortgage overpayment calculator and the potential savings that can be had.
Topics: business, House, Mortgage, mortgage rates