Past Tense

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. With the fixed rate mortgage comes security. With the mortgage overpayment calculator comes potential savings.

Of the various types of mortgage available, the fixed rate is only one of them. A fixed period of interest that may be a couple or several years. The interest rate you pay is locked; therefore your monthly payments are also locked.

Do fixed rate mortgages have any plus points? No need to worry about fluctuating interest rates. Your rate and your payments are fixed. You can estimate your outgoings easier knowing your monthly payment is fixed.

Bank base rates may rise drastically, however yours will be the same because it’s fixed. In the last few decades we have seen interest rates almost double in a few short months. People on variable rate mortgages are much more likely to be affected by rapid rises in interest rates.

There is a situation when maybe you should think twice about a fixed rate mortgage. 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. These types of situations could invoke a nasty redemption penalty on your fixed rate mortgage.

Fixed rate mortgages nearly always come bundled with a redemption penalty. At a time when you least need it, you could get hit with a redemption penalty. You must think twice before agreeing to a fixed rate deal if a charge like this will badly affect you.

One thing to consider while having the mortgage is to pay a bit extra every month if you can afford it. 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.

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. Not only do you save years but you save piles of cash, usually many thousands.

In what way does a mortgage overpayment calculator work? Enter all the figures that relate 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. Putting bigger figures in the overpayment box will show bigger savings and even more time saved.

You may be surprised at some of the savings you can make. As an example, borrow 100,000 at 5% over 25 years. If you pay an extra fifty each month, you can shave more than 3 years off the length and save 12,000 in interest payments.

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 get to shave over 6 years off the length and over 20 grand saved. That’s pretty good.

Another benefit is that for the last few years of the original (25 year) term, you don’t pay anything. Being free of your mortgage chains a few years early is a definite reality if you can pay extra now. 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 don’t pay this money to your lender so you get to keep it, either save it or spend it.

We’ve looked at some of the advantages of a fixed rate mortgage. Regular payments and a good night sleep. We also looked at potential savings by paying extra each month. Every little helps.