Fixed Rate Mortgage – Not As Good As Sex But Worth Trying!
We’ll have a look at what benefits there are to a fixed rate mortgage for you.
We’ll then look at using a mortgage overpayment calculator.
Security comes with the fixed rate mortgage, whereas huge savings can come with the overpayment calculator.
There are a few different types of mortgage, the fixed rate mortgage being only one of them.
You get a fixed interest period for several years.
Locked in interest rates mean locked in monthly payments.
Are there any benefits to a fixed rate mortgage?
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.
Your payment is locked so it really doesn’t matter what the general rates are doing.
In our recent history there have been some frightening short term interest rate rises.
You may struggle to meet your payments if you have a variable mortgage and rates rise suddenly.
Under certain circumstances, a fixed rate mortgage could be a mistake.
The arrival of a new child could mean you need a bigger home and need to move. These are reasons to avoid fixed rate mortgages.
Any situation which sees you changing mortgage can invoke a horrid redemption penalty on you.
Nearly all fixed rate mortgages have a redemption penalty attached.
These charges can be pretty steep, and come at a time when you don’t need the extra stress.
Think hard before you take a fixed rate mortgage as these charges can really disrupt your plans.
One thing to consider while having the mortgage is to pay a bit extra every month if you can afford it.
You are not tied to make the same payments for the duration of the mortgage, usually 25 years.
You lender will prefer you make the minimum payment and will never tell you it’s possible to pay extra.
Are there any advantages to paying a bit extra each month?
Topping up your monthly minimum payment means you can knock a few years of the length of your mortgage.
Not only do you save years, you can also save thousands and thousands of your hard earned money.
What do you do with a mortgage overpayment calculator?
You can enter all the relevant figures from your particular deal.
You can then play around by changing the figure you can afford to overpay.
The calculator tells you how many years you will knock off.
It also tells you what sort of financial saving you can expect to make.
Putting bigger figures in the overpayment box will show bigger savings and even more time saved.
You may be surprised at some of the savings you can make.
If you borrowed a hundred thousand at five percent over twenty five years.
You could save over twelve thousand and shorten the mortgage by more than 3 years just by paying an extra 50 each month.
That example is paying just 50 extra every month. What if you could afford 100 a month to overpay?
Using the same example mortgage from earlier we now pay 100 extra.
You can save 20 thousand in cash. You can also shorten your mortgage by more than 6 years.
Another plus point is the years you knock off are totally payment free.
Being free of your mortgage chains a few years early is a definite reality if you can pay extra now.
Lenders will not tell you this, they like to keep this a secret.
If we revisit the example where we knocked more than six years off the mortgage.
We could save a further 40 thousand by not having to pay your lender every month.
You can do what you like with this extra as it never needs to be paid to your lender.
To recap we had a look at what benefit a fixed rate mortgage has for you.
Regular payments and a good night sleep.
Also consider the huge potential in making a little overpayment every month. Even small amounts will add up.
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- Vital Components Of Mortgage Loan Refinance Advice
- Mortgage Rate Selection
- Popular Questions from Individual Mortgage Note Holders Wanting To Sell A Mortgage Note
- How to obtain the best home loan in a insane mortgage market
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Filed under: Real Estate
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