Know Wnen To Avoid A Fixed Rate Mortgage | Mortgage

Know Wnen To Avoid A Fixed Rate Mortgage

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. 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. You get a fixed interest period for several years. Your interest rate, and therefore your payments are fixed.

Do fixed rate mortgages have any plus points? Because your payments stay the same you don't get ups and downs in your monthly payments. You can plan your monthly spending easier knowing your mortgage won't go up unexpectedly.

No matter what the average interest rate is, your rate will stay the same. 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. Moving home in the next year or so. Having a planned or even unplanned child can be reasons to avoid fixed rate mortgages. In situations like these you may need to redeem the mortgage and pay a hefty redemption penalty on the fixed rate mortgage.

Fixed rate mortgages usually come with charges called redemption penalties. You can get hit with a nasty charge when you are least expecting it. Think hard before you take a fixed rate mortgage as these charges can really disrupt your plans.

During the term of your mortgage it's worth considering paying a bit extra each month if your budget will stretch. You are not tied to make the same payments for the duration of the mortgage, usually 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 are the up sides to paying extra each and every month? The extra payments reduce the sum owed quicker and the result is you save years off the term of your deal. 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? You can enter all the relevant figures from your particular deal. You also enter a figure that you want to overpay. You can play around with this figure.

The calculator tells you how many years you will knock off. It will tell you what sort of cash lump sum you can expect to save as well. The figures in years and cash saved will increase the more you overpay each month.

You might be pleasantly surprised at the savings to be made. If you borrowed a hundred thousand at five percent over twenty five years. 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. 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. Being mortgage free a few years early could easily be achieved by paying a bit extra now. You won't hear this info from any lenders though. You need to discover info like this for yourself.

In the example where we paid an extra 100 every month and shortened the mortgage by six years. You pay nothing more for the last 6 years of the term, which equates to about another 40 grand saved. This is 40 grand in your pocket and not your lenders. Overpaying is difficult, make no mistake, but the rewards can be amazing.

We've looked at some of the advantages of a fixed rate mortgage. Every month you pay the same so you get to sleep easy at night knowing this. 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.

The Voluntary Mortgage Regulator got rid of Monty as chief because he was actually saving punters too much cash! Get a great fixed rate mortgage deal here. With a mortgage overpayment calculator you could discover how to cut years off your mortgage.