Sleep Like A Baby With A Fixed Rate Mortgage | Mortgage

Sleep Like A Baby With A Fixed Rate Mortgage

by MontyBurn

Well take a look at fixed rate mortgages and how they can be good for you. We'll then look at using a mortgage overpayment calculator. Security comes with the fixed rate mortgage, whereas huge savings can come with the overpayment calculator.

Fixed rate mortgages are one of a few different types of mortgage available. The interest rate is fixed, usually for a number of years. Locked in interest rates mean locked in monthly payments.

What, if any, are the up sides to fixed rate mortgages? No need to worry about fluctuating interest rates. Your rate and your payments are fixed. It's a lot easier to plan financially knowing your payment will be the same.

Bank base rates may rise drastically, however yours will be the same because it's fixed. In the not too distant past there have been some real scary rate rises. People on variable rate mortgages are much more likely to be affected by rapid rises in interest rates.

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.

Most fixed rate mortgages come tied to a nasty redemption penalty. When you can least afford it you could have a charge slapped on you. If a charge like this will hurt you then you must think very carefully before taking a fixed rate mortgage.

It's worth thinking about paying a bit extra each month in addition to whatever you normally pay. You may have a fixed rate but it doesn't mean your payments have to be fixed if you can afford extra. 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. By paying a bit extra now, the savings mount up substantially later on.

What does a mortgage overpayment calculator do? It uses figures from your mortgage. Amount, interest rate, length of term etc. You then enter any extra amount you can afford to pay. Or enter various value for fun.

The calculator will show you how many years you can expect to shorten your mortgage by. You get to see how much money you could possibly save. Putting bigger figures in the overpayment box will show bigger savings and even more time saved.

You may be amazed by how much you could save. If you had a 25 year mortgage and borrowed 100 grand at 5% interest. Making an overpayment of 50 every month will save you 12,000 and knock over 3 years off.

Nice savings on a 50 extra payment. But what happens if you pay an extra 100 though? Using the same example mortgage from earlier we now pay 100 extra. You can save 20 thousand in cash. You can also shorten your mortgage by more than 6 years.

Another plus point is the years you knock off are totally payment free. You could be free of the shackles of your mortgage early by paying a little more now. You will never hear this from your lender though; it's simply not in their interests to tell you to pay off early.

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 saving is yours as you will never need to give it to your lender as you originally planned.

In conclusion we listed a few benefits of a fixed rate mortgage. Regular payments and a good night sleep. 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.

Monty Burn was head honcho at the Voluntary Mortgage Regulator until they sacked him for helping the regular guy on the street save money. Find out how to get a top fixed rate mortgage deal at his site. Maybe have a play with our mortgage overpayment calculator and shock yourself at how much cash you could save.