The Time Is Right For Fixed Rate Mortgages | Mortgage

The Time Is Right For Fixed Rate Mortgages

by MontyBurn

We'll discover what the fixed rate mortgage is, and its benefits. Then prepare to be amazed at the savings made with a mortgage overpayment calculator. The fixed rate gives you security for a while & the overpayment calculator might give you a pleasant surprise.

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. Your interest rate, and therefore your payments are fixed.

Are there any benefits to a fixed rate mortgage? Your payment is fixed because your particular interest rate is fixed. You can benefit by knowing your monthly payment is fixed which allows you to budget more effectively.

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. A rapid rise over a year or so could really see payments rise for those on standard variable mortgages.

There can be certain circumstances when a fixed rate mortgage may not be right for you. The arrival of a new child could mean you need a bigger home and need to move. These are 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.

A redemption penalty is a charge that almost always comes with a fixed rate deal. These charges can be pretty steep, and come at a time when you don't need the extra stress. There is never a good time to be hit with extra charges so think carefully before taking the fixed rate mortgage.

You might like to think about paying a small extra overpayment each month as you go through the length of your mortgage. You may have a fixed rate but it doesn't mean your payments have to be fixed if you can afford extra. The lenders would love you to do this but they will rarely tell you that you can indeed pay extra.

What are the up sides to paying extra each and every month? If you consistently pay extra in the early years of your agreement you can knock several years off the length. You can save a shedload of cash as well as knock a few years off.

In what way does a mortgage overpayment calculator work? You can enter all the relevant figures from your particular deal. You then enter any extra amount you can afford to pay. Or enter various value for fun.

You get to see what sort of length in years you can knock off. It also gives you a figure in cash that you can expect to save. 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.

That example is paying just 50 extra every month. What if you could afford 100 a month to overpay? The same mortgage example but paying 100 extra every month. In this new example the time saved is over six years and the financial saving is more than twenty thousand.

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 won't hear this info from any lenders though. You need to discover info like this for yourself.

In our example where we saved six years off the length with a hundred a month overpayment. A six year saving translates into about a forty grand saving in cash. You can do what you like with this extra as it never needs to be paid to your lender.

We've looked at some of the advantages of a fixed rate mortgage. Regular payments and a good night sleep. We also looked into the future and saw some big savings if you can make a little overpayment now.

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. Read up on how to get a great fixed rate deal on your mortgage. Maybe have a play with our mortgage overpayment calculator and shock yourself at how much cash you could save.