Budgeting Made Easy With A Fixed Rate Mortgage | Mortgage

Budgeting Made Easy With A Fixed Rate Mortgage

by MontyBurn

We are going to investigate what a fixed rate mortgage can do 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.

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. If the interest rate remains static, so do your monthly payments.

What are the fixed rate mortgage good points? You benefit by not having the yo-yo effect on your monthly payments. They stay the same every month. You can benefit by knowing your monthly payment is fixed which allows you to budget more effectively.

Your payment is locked so it really doesn't matter what the general rates are doing. 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.

Under certain circumstances, a fixed rate mortgage could be a mistake. Moving home in the next year or so. Having a planned or even unplanned child can be reasons to avoid fixed rate mortgages. Any situation which sees you changing mortgage can invoke a horrid redemption penalty on you.

A redemption penalty is a charge that almost always comes with a fixed rate deal. 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.

It's worth thinking about paying a bit extra each month in addition to whatever you normally pay. 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.

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.

In what way does a mortgage overpayment calculator work? Enter all the figures that relate to your mortgage. You also enter a figure that you want to overpay. You can play around with this figure.

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 faster you finish your mortgage.

There are astonishing amounts of savings to be had. Quick example, 25 year mortgage borrowing 100,000 at 5%. Just by paying an extra 50 every month could see you knock over 3 years off and save over 12 grand.

The last example was an overpayment of 50 every month, but what happens if you pay 100 extra. Using the same figures in the mortgage but substituting 100 extra for the previous 50 extra. You get to shave over 6 years off the length and over 20 grand saved. That's pretty good.

An extra benefit is the years you save are free from any payment whatsoever. Being mortgage free a few years early could easily be achieved by paying a bit extra now. 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. 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 difficult, make no mistake, but the rewards can be amazing.

To recap we had a look at what benefit a fixed rate mortgage has for you. You get to sleep easy in the knowledge your payment will stay the same month after month. We also looked at potential savings by paying extra each month. Every little helps.

DISCLAIMER: This article is provided as information only and is not to be taken as financial advice.

Grab a FREE copy of Monty's Mortgage Bible, the book that caused the Voluntary Mortgage Regulator to sack him. Find out how to get the best fixed rate mortgage deal. With a mortgage overpayment calculator you could discover how to cut years off your mortgage.