Fixed Rate Mortgage - Good Or Bad?

We are going to investigate what a fixed rate mortgage can do for you. We will also look into how a mortgage overpayment calculator might save you lots of cash. From definite security with the fixed rate mortgage to potential cash saved with the overpayment calculator.

There are a few different types of mortgage, the fixed rate being only one of them. You get a fixed interest period for several years. Locked in interest rates mean locked in monthly payments.

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 get to budget easier every month as your payments remain the same.

Your payment is locked so it really doesn't matter what the general rates are doing. In our recent history there have been some frightening short term interest rate rises. Being on a variable rate leaves you susceptible to the rapid rise of your monthly payment.

Under certain circumstances, a fixed rate mortgage could be a mistake. 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. In situations like these you may need to redeem the mortgage and pay a hefty redemption penalty on the fixed rate mortgage.
Nearly all fixed rate mortgages have a redemption penalty attached. When you can least afford it you could have a charge slapped on you. 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 not realize but you can pay any amount over the minimum monthly payment. 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. Not only do you save years but you save piles of cash, usually many thousands.
What do you do with a mortgage overpayment calculator? You enter your mortgage details. The amount borrowed, the length, the interest rate etc. You can then play around by changing the figure you can afford to overpay.

The calculator will then tell you how many years you might reduce your mortgage by. You get the expectant cash saving as well. The figures in years and cash saved will increase the more you overpay each month.

You may be amazed by how much you could save. If we take a mortgage of 100,000 borrowed over 25 years and assume you get an average 5% interest rate. You could save over twelve thousand and shorten the mortgage by more than 3 years just by paying an extra 50 each month.

The last example was an overpayment of 50 every month, but what happens if you pay 100 extra. Using the same figures in the mortgage but substituting 100 extra for the previous 50 extra. You can knock a staggering 6 years or more off the length and save yourself in the region of 20 thousand.

One more advantage is that the years you save are payment free, nothing at all to pay. By paying a little extra now, you could easily be mortgage free well before you ever expected. You never get info like this from your lender. This sort of stuff is kept quiet by the industry.

If we look at the example where we paid 100 extra and knocked over 6 years off the length. This shortening of the mortgage by six years saves you another 40,000 or more. 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 at potential savings by paying extra each month. Every little helps.

Article Source: the-Articles.com




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Author: MontyBurn


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