Is A Fixed Rate Mortgage The Right One For You? | Mortgage

Is A Fixed Rate Mortgage The Right One For You?

by MontyBurn

We'll have a look at what benefits there are to a fixed rate mortgage for you. Then prepare to be amazed at the savings made with a mortgage overpayment calculator. You get security from the fixed rate mortgage & you may get a nice surprise from the overpayment calculator.

Fixed rate mortgages are one of a few different types of mortgage available. You get a fixed interest period for several years. Your interest rate, and therefore your payments are fixed.

What, if any, are the up sides to fixed rate mortgages? Your payment is fixed because your particular interest rate is fixed. It's a lot easier to plan financially knowing your payment will be the same.

No matter what the average interest rate is, your rate will stay the same. 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.

There is a situation when maybe you should think twice about a fixed rate mortgage. If you suddenly have an extra family member and need more space. Or you are simply considering moving home soon. Either of these events will cause you to trigger an unwanted redemption penalty.

Fixed rate mortgages usually come with charges called redemption penalties. You can get hit with a nasty charge when you are least expecting it. If a charge like this will hurt you then you must think very carefully before taking a fixed rate mortgage.

One thing to consider while having the mortgage is to pay a bit extra every month if you can afford it. You may not realise but you can pay any amount over the minimum monthly payment. The lenders would love you to do this but they will rarely tell you that you can indeed pay extra.

If you do pay extra each month, are there any benefits to this? You can shave several years off your mortgage term by paying slightly more each month. 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? It uses figures from your mortgage. Amount, interest rate, length of term etc. You can enter a figure that you may think about paying as an extra payment each month.

The calculator will then tell you how many years you might reduce your mortgage by. It also gives you a figure in cash that you can expect to save. Putting bigger figures in the overpayment box will show bigger savings and even more time saved.

There are astonishing amounts of savings to be had. 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.

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. This saves you more than 20,000 and knocks a respectable 6 years off the term.

An extra advantage is you won't have any payments to make during the last few years of the mortgage. It's definitely a reality for you to be free of your mortgage years before planned. Of course your lender will never tell you this, you have to discover 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. 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. You get a good night's sleep and regular level payments. Also consider the huge potential in making a little overpayment every month. Even small amounts will add up.

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

The Voluntary Mortgage Regulator got rid of Monty as chief because he was actually saving punters too much cash! Read up on how to get a great fixed rate deal on your mortgage. Try our overpayment mortgage calculator and discover how to save shedloads of cash.