Is A Fixed Rate Mortgage For You?

Let's find out just what a fixed rate mortgage is, and how it may benefit you. We'll then look at using a mortgage overpayment calculator. With the fixed rate mortgage comes security. With the mortgage overpayment calculator comes potential savings
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. Locked in interest rates mean locked in monthly payments.

Are there any benefits to a fixed rate mortgage? A fixed rate of interest means a fixed monthly mortgage payment. You get to budget easier every month as your payments remain the same.

No matter what the average interest rate is, your rate will stay the same. 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 is a situation when maybe you should think twice about a fixed rate mortgage. If you suddenly have an extra family member and need more space. Or you are simply considering moving home soon. Either of these events will cause you to trigger an unwanted redemption penalty.

Nearly all fixed rate mortgages have a redemption penalty attached. When you can least afford it you could have a charge slapped on you. You must think twice before agreeing to a fixed rate deal if a charge like this will badly affect you.

You might like to think about paying a small extra overpayment each month as you go through the length of your mortgage. You are not tied to make the same payments for the duration of the mortgage, usually 25 years. Lenders prefer you to make payments like this but they never inform you that you could pay extra if you wish.
What are the best reasons to paying a bit extra every month? You can easily shave years of your mortgage. Be debt free much earlier. By paying a bit extra now, the savings mount up substantially later on.

In what way does a mortgage overpayment calculator work? It uses figures from your mortgage. Amount, interest rate, length of term etc. You can enter a figure that you may think about paying as an extra payment each month.

The calculator will then tell you how many years you might reduce your mortgage by. It also gives you a figure in cash that you can expect to save. Putting bigger figures in the overpayment box will show bigger savings and even more time saved.
You might be pleasantly surprised at the savings to be made. If you borrowed a hundred thousand at five percent over twenty five 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.

If you can afford to pay 100 extra instead of 50 what would happen? Paying 100 extra every month using the same example mortgage. In this new example the time saved is over six years and the financial saving is more than twenty thousand.

An extra advantage is you won't have any payments to make during the last few years of the mortgage. 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.

If we revisit the example where we knocked more than six years off the mortgage. This shortening of the mortgage by six years saves you another 40,000 or more. You don't pay this money to your lender so you get to keep it, either save it or spend it.

To recap we had a look at what benefit a fixed rate mortgage has for you. Regular payments and a good night sleep. We also had a look at a mortgage overpayment calculator and the potential savings that can be had.

Article Source: the-Articles.com

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