Take A Fixed Rate Mortgage While Rates Are At A Record Low | Mortgage

Take A Fixed Rate Mortgage While Rates Are At A Record Low

by MontyBurn

Well take a look at fixed rate mortgages and how they can be good for you. We'll then take a look at an overpayment calculator for your mortgage. 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 your interest rate locked for the period of the deal, usually a few years. The interest rate you pay is locked; therefore your monthly payments are also locked.

What are the advantages of a fixed rate mortgage? Your payment is fixed because your particular interest rate is fixed. You can estimate your outgoings easier knowing your monthly payment is fixed.

If the bank base interest rate starts to rise, yours will stay as it is. In our recent history there have been some frightening short term interest rate rises. People on variable rate mortgages are much more likely to be affected by rapid rises in interest rates.

A fixed rate mortgage could be a mistake for you under certain circumstances. If you think you may move home, or even have another child and need an extra bedroom, then think carefully before taking a fixed rate mortgage. Any situation which sees you changing mortgage can invoke a horrid redemption penalty on you.

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.

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. You lender will prefer you make the minimum payment and will never tell you it's possible to pay extra.

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. You also save a lot of money in the process, sometimes a staggering amount.

What do you do with a mortgage overpayment calculator? You input various figures relating to your mortgage. You then enter any extra amount you can afford to pay. Or enter various value for fun.

The calculator tells you how many years you will knock off. It also tells you what sort of financial saving you can expect to make. Both the years and cash saved obviously increase if you put in a higher overpayment figure.

Some of the savings can be staggering. If we take a mortgage of 100,000 borrowed over 25 years and assume you get an average 5% interest rate. You could save over twelve thousand and shorten the mortgage by more than 3 years just by paying an extra 50 each month.

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.

An extra benefit is the years you save are free from any payment whatsoever. 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 look at the example where we paid 100 extra and knocked over 6 years off the length. This shortening of the mortgage by six years saves you another 40,000 or more. This saving is yours as you will never need to give it to your lender as you originally planned.

In this article we've looked at the potential of fixed rate mortgages. Regular payments and a good night sleep. 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! Read up on how to get a great fixed rate deal on your mortgage. With a mortgage overpayment calculator you could discover how to cut years off your mortgage.