Past Tense

Well take a look at fixed rate mortgages and how they can be good for you. We’ll also take a peek at how much you could save with an overpayment calculator. Security comes with the fixed rate mortgage, whereas huge savings can come 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. If the interest rate remains static, so do your monthly payments.

What, if any, are the up sides to fixed rate mortgages? A fixed rate of interest means a fixed monthly mortgage payment. You can estimate your outgoings easier knowing your monthly payment is fixed.

Your payment is locked so it really doesn’t matter what the general rates are doing. There have been some alarming short term interest rate rises in our recent history. If the rates rose drastically over a short term those on variable mortgages could struggle to meet payments.

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. 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. These unexpected charges can hurt. Consider carefully whether a fixed rate is the one for you.

A consideration during your mortgage term is to pay a bit extra each month on top of your normal payment. You may have a fixed rate but it doesn’t mean your payments have to be fixed if you can afford extra. Lenders prefer you to make payments like this but they never inform you that you could pay extra if you wish.

If you do pay extra each month, are there any benefits to this? The extra payments reduce the sum owed quicker and the result is you save years off the term of your deal. You also save a lot of money in the process, sometimes a staggering amount.

In what way does a mortgage overpayment calculator work? Enter all the figures that relate to your mortgage. You also enter a figure that you want to overpay. You can play around with this figure.

You get a resulting figure out of the calculator in years you can shave off. It also tells you what sort of financial saving you can expect to make. Playing around with the actual overpayment figure can reveal that the more you can pay, the faster you finish your mortgage.

You may be surprised at some of the savings you can make. If you had a 25 year mortgage and borrowed 100 grand at 5% interest. 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. This saves you more than 20,000 and knocks a respectable 6 years off the term.

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. Lenders will not tell you this, they like to keep this a secret.

In our example where we saved six years off the length with a hundred a month overpayment. 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.

There you have a few benefits of going for a fixed rate mortgage. Regular payments and a good night sleep. We also had a look at the savings to be made by paying a bit extra every month. It all adds up.