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.
From definite security with the fixed rate mortgage to potential cash saved with the overpayment calculator.
A fixed rate mortgage is a special type of mortgage where you have a fixed interest period.
The interest rate is fixed, usually for a number of years.
The interest rate you pay is locked; therefore your monthly payments are also locked.
Are there any benefits to a fixed rate mortgage?
A fixed rate of interest means a fixed monthly mortgage payment.
You can plan your monthly spending easier knowing your mortgage won’t go up unexpectedly.
Bank base rates may rise drastically, however yours will be the same because it’s fixed.
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 are a few situations when a fixed rate mortgage may be a bad decision.
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 sort of situation like this can cause unexpected charges by way of redemption penalties.
A redemption penalty is a charge that almost always comes with a fixed rate deal.
These redemption penalties can hit you hard just when you don’t need it.
You must think twice before agreeing to a fixed rate deal if a charge like this will badly affect you.
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 are the best reasons to paying a bit extra every month?
If you consistently pay extra in the early years of your agreement you can knock several years off the length.
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.
You get a resulting figure out of the calculator in years you can shave off.
You get the expectant cash saving as well.
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.
Quick example, 25 year mortgage borrowing 100,000 at 5%.
Just by paying an extra 50 every month could see you knock over 3 years off and save over 12 grand.
That example is paying just 50 extra every month. What if you could afford 100 a month to overpay?
Using the same example mortgage from earlier we now pay 100 extra.
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.
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.
If we revisit the example where we knocked more than six years off the mortgage.
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 this article we’ve looked at the potential of fixed rate mortgages.
You get a good night’s sleep and regular level payments.
Also consider the huge potential in making a little overpayment every month. Even small amounts will add up.
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