Well take a look at fixed rate mortgages and how they can be good 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. Usually for a period of several years, you get a fixed rate of interest. Your interest rate, and therefore your payments are fixed.
Are there any benefits to a fixed rate mortgage? Because your payments stay the same you don’t get ups and downs in your monthly payments. You can benefit by knowing your monthly payment is fixed which allows you to budget more effectively.
Your payment is locked so it really doesn’t matter what the general rates are doing. In the last few decades we have seen interest rates almost double in a few short months. You may struggle to meet your payments if you have a variable mortgage and rates rise suddenly.
There is a situation when maybe you should think twice about a fixed rate mortgage. 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. These types of situations could invoke a nasty redemption penalty on your 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. If a charge like this will hurt you then you must think very carefully before taking a fixed rate mortgage.
During the term of your mortgage it’s worth considering paying a bit extra each month if your budget will stretch. You don’t have to make the same payment month after month for 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? Topping up your monthly minimum payment means you can knock a few years of the length of your mortgage. You also save a lot of money in the process, sometimes a staggering amount.
How do you use a mortgage overpayment calculator? 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.
You get to see what sort of length in years you can knock off. You get the expectant cash saving as well. Both the years and cash saved obviously increase if you put in a higher overpayment figure.
There are astonishing amounts of savings to be had. 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? Paying 100 extra every month using the same example mortgage. You can knock a staggering 6 years or more off the length and save yourself in the region of 20 thousand.
Another plus point is the years you knock off are totally payment free. 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.
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. This saving is yours as you will never need to give it to your lender as you originally planned.
There you have a few benefits of going for a fixed rate mortgage. Not only do you get set monthly payments, you get to sleep easy at night because of it. Also consider the huge potential in making a little overpayment every month. Even small amounts will add up.
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