The Time Is Right For Fixed Rate Mortgages
We’ll discover what the fixed rate mortgage is, and its benefits.
We’ll also take a peek at how much you could save with an overpayment calculator.
The fixed rate gives you security for a while & the overpayment calculator might give you a pleasant surprise.
A fixed rate mortgage is one of the various types available.
The interest rate is fixed, usually for a number of years.
Your interest rate, and therefore your payments are fixed.
Do fixed rate mortgages have any plus points?
You benefit by not having the yo-yo effect on your monthly payments. They stay the same every month.
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 the not too distant past there have been some real scary rate rises.
People on variable rate mortgages are much more likely to be affected by rapid rises in interest rates.
Under certain circumstances, a fixed rate mortgage could be a mistake.
If you suddenly have an extra family member and need more space. Or you are simply considering moving home soon.
Any sort of situation like this can cause unexpected charges by way of redemption penalties.
Nearly all fixed rate mortgages have a redemption penalty attached.
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.
During the term of your mortgage it’s worth considering paying a bit extra each month if your budget will stretch.
You don’t have to make the same payment month after month for 25 years.
You lender will prefer you make the minimum payment and will never tell you it’s possible to pay extra.
What are the best reasons to paying a bit extra every month?
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.
What do you do with a mortgage overpayment calculator?
You can enter all the relevant figures from your particular deal.
You then enter any extra amount you can afford to pay. Or enter various value for fun.
The calculator will then tell you how many years you might reduce your mortgage by.
It will tell you what sort of cash lump sum you can expect to save as well.
If you play around with the overpayment figure you can see that the more you overpay the more you save, in cash and years.
You might be pleasantly surprised at the savings to be made.
As an example, borrow 100,000 at 5% over 25 years.
By paying an extra fifty each month could save you over 3 years and 12 thousand.
Nice savings on a 50 extra payment. But what happens if you pay an extra 100 though?
We’ll use the same mortgage example figures but pay 100 extra.
In this new example the time saved is over six years and the financial saving is more than twenty thousand.
One more advantage is that the years you save are payment free, nothing at all to pay.
Being mortgage free a few years early could easily be achieved by paying a bit extra now.
You will never hear this from your lender though; it’s simply not in their interests to tell you to pay off early.
In the example where we paid an extra 100 every month and shortened the mortgage by six years.
No payments for 6 years means another 40 thousand saved in monthly payments.
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 looked into the future and saw some big savings if you can make a little overpayment now.
Tags: business, family, finance, fixed rate mortgage, home, house, mortgage, mortgage deals, mortgage overpayment calculator, mortgage rates, real estate, society, standard mortgages
