We'll have a look at what benefits there are to a fixed rate mortgage for you.
Then prepare to be amazed at the savings made with a mortgage overpayment calculator.
Security comes with the fixed rate mortgage, whereas huge savings can come with the overpayment calculator.
A fixed rate mortgage is a special type of mortgage where you have a fixed interest period.
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.
Do fixed rate mortgages have any plus points?
Your payment is fixed because your particular interest rate is fixed.
You can estimate your outgoings easier knowing your monthly payment is fixed.
It doesn't matter how much interest rates rise, your payments are fixed.
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.
There is a situation when maybe you should think twice about a fixed rate mortgage.
You may decide you need to move house, or even have an unexpected child and simply need more room.
Either of these events will cause you to trigger an unwanted redemption penalty.
Fixed rate mortgages nearly always come bundled with a redemption penalty.
You can get hit with a nasty charge when you are least expecting it.
There is never a good time to be hit with extra charges so think carefully before taking the 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 may have a fixed rate but it doesn't mean your payments have to be fixed if you can afford extra.
You lender will not tell you it's possible to pay extra as they prefer you just pay the minimum.
What benefit does paying a bit extra each month have on you and your mortgage?
If you consistently pay extra in the early years of your agreement you can knock several years off the length.
Not only do you save years but you save piles of cash, usually many thousands.
What do you do with a mortgage overpayment calculator?
It uses figures from your mortgage. Amount, interest rate, length of term etc.
You then enter any extra amount you can afford to pay. Or enter various value for fun.
The calculator will show you how many years you can expect to shorten your mortgage by.
It also gives you a figure in cash that you can expect to save.
Both the years and cash saved obviously increase if you put in a higher overpayment figure.
Some of the savings can be staggering.
If we take a mortgage of 100,000 borrowed over 25 years and assume you get an average 5% interest rate.
Making an overpayment of 50 every month will save you 12,000 and knock over 3 years off.
Now an example of 100 extra instead of 50 extra.
We'll use the same mortgage example figures but pay 100 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.
You could be free of the shackles of your mortgage early by paying a little more now.
Of course your lender will never tell you this, you have to discover this on your own.
In the example where we paid an extra 100 every month and shortened the mortgage by six years.
A six year saving translates into about a forty grand saving in cash.
This is 40 grand in your pocket and not your lenders. Overpaying is difficult, make no mistake, but the rewards can be amazing.
There you have a few benefits of going for a fixed rate mortgage.
Not only do you get set monthly payments, you get to sleep easy at night because of it.
We also had a look at a mortgage overpayment calculator and the potential savings that can be had.
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