Compared To Sex - Not As Good - But Worth Trying A Fixed Rate Mortgage
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. With the fixed rate mortgage comes security. With the mortgage overpayment calculator comes potential savings.
There are a few different types of mortgage, the fixed rate being only one of them. You get your interest rate locked for the period of the deal, usually a few years. Because the interest rate is fixed, so are your monthly payments.
What, if any, are the up sides to fixed rate mortgages? 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.
If the bank base interest rate starts to rise, yours will stay as it is. In our lifetime we have already seen some distressing interest rate rises. You may struggle to meet your payments if you have a variable mortgage and rates rise suddenly.
There can be certain circumstances when a fixed rate mortgage may not be right for you. 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. Either of these events will cause you to trigger an unwanted redemption penalty.
Fixed rate mortgages usually come with charges called redemption penalties. When you can least afford it you could have a charge slapped on you. If a charge like this will hurt you then you must think very carefully before taking a fixed rate mortgage.
A consideration during your mortgage term is to pay a bit extra each month on top of your normal payment. You may not realise but you can pay any amount over the minimum monthly payment. You lender will not tell you it's possible to pay extra as they prefer you just pay the minimum.
What are the best reasons to paying a bit extra every month? Topping up your monthly minimum payment means you can knock a few years of the length of your mortgage. You can save a shedload of cash as well as knock a few years off.
What do you do with a mortgage overpayment calculator? 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.
The calculator will show you how many years you can expect to shorten your mortgage by. 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. If you had a 25 year mortgage and borrowed 100 grand at 5% interest. Making an overpayment of 50 every month will save you 12,000 and knock over 3 years off.
The last example was an overpayment of 50 every month, but what happens if you pay 100 extra. The same mortgage example but paying 100 extra every month. You can save 20 thousand in cash. You can also shorten your mortgage by more than 6 years.
One more advantage is that the years you save are payment free, nothing at all to pay. You could be free of the shackles of your mortgage early by paying a little more now. You will never hear this from your lender though; it's simply not in their interests to tell you to pay off early.
If we go back to the extra 100 each month where we managed to shave six years off. 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. Not only do you get set monthly payments, you get to sleep easy at night because of it. We also looked into the future and saw some big savings if you can make a little overpayment now.