Why Should I Think About A Fixed Rate Mortgage?
June 4th, 2009. Published under Culture and Society. No Comments.
Well take a look at fixed rate mortgages and how they can be good for you. Then prepare to be amazed at the savings made with a mortgage overpayment calculator. You get security from the fixed rate mortgage & you may get a nice surprise from the overpayment calculator.
Fixed rate mortgages are one of a few different types of mortgage available. Usually for a period of several years, you get a fixed rate of interest. Your interest rate, and therefore your payments are fixed.
What, if any, are the up sides to fixed rate mortgages? Your payment is fixed because your particular interest rate is fixed. It’s a lot easier to plan financially knowing your payment will be the same.
It doesn’t matter how much interest rates rise, your payments are fixed. In the not too distant past there have been some real scary rate rises. Being on a variable rate leaves you susceptible to the rapid rise of your monthly payment.
There can be certain circumstances when a fixed rate mortgage may not be right for you. You may decide you need to move house, or even have an unexpected child and simply need more room. Any sort of situation like this can cause unexpected charges by way of redemption penalties.
Fixed rate mortgages usually come with charges called redemption penalties. These redemption penalties can hit you hard just when you don’t need it. These unexpected charges can hurt. Consider carefully whether a fixed rate is the one for 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. 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? 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, you can also save thousands and thousands of your hard earned money.
What does a mortgage overpayment calculator do? You can enter all the relevant figures from your particular deal. You can put various amounts in as the overpayment. Feel free to play around with this figure.
You get to see what sort of length in years you can knock off. You get the expectant cash saving as well. Both the years and cash saved obviously increase if you put in a higher overpayment figure.
There are astonishing amounts of savings to be had. 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.
Now an example of 100 extra instead of 50 extra. Using the same figures in the mortgage but substituting 100 extra for the previous 50 extra. This saves you more than 20,000 and knocks a respectable 6 years off the term.
Another plus point is the years you knock off are totally payment free. 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 look at the example where we paid 100 extra and knocked over 6 years off the length. We could save a further 40 thousand by not having to pay your lender every month. You don’t pay this money to your lender so you get to keep it, either save it or spend it.
In this article we’ve looked at the potential of fixed rate mortgages. You get to sleep easy in the knowledge your payment will stay the same month after month. We also had a look at a mortgage overpayment calculator and the potential savings that can be had.