Well take a look at fixed rate mortgages and how they can be good 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 being only one of them. Usually for a period of several years, you get a fixed rate of interest. 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.
No matter what the average interest rate is, your rate will stay the same. There have been some alarming short term interest rate rises in our recent history. A rapid rise over a year or so could really see payments rise for those on standard variable mortgages.
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. Any sort of situation like this can cause unexpected charges by way of redemption penalties.
A redemption penalty is a charge that almost always comes with a fixed rate deal. You can get hit with a nasty charge when you are least expecting it. These unexpected charges can hurt. Consider carefully whether a fixed rate is the one for you.
During the term of your mortgage it's worth considering paying a bit extra each month if your budget will stretch. You may not realise but you can pay any amount over the minimum monthly payment. The lenders would love you to do this but they will rarely tell you that you can indeed pay extra.
What benefit does paying a bit extra each month have on you and your mortgage? You can shave several years off your mortgage term by paying slightly more each month. By paying a bit extra now, the savings mount up substantially later on.
What do you do with a mortgage overpayment calculator? You enter your mortgage details. The amount borrowed, the length, the interest rate etc. 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 to see how much money you could possibly save. Putting bigger figures in the overpayment box will show bigger savings and even more time saved.
There are astonishing amounts of savings to be had. Quick example, 25 year mortgage borrowing 100,000 at 5%. You could save over twelve thousand and shorten the mortgage by more than 3 years just by paying an extra 50 each month.
If you can afford to pay 100 extra instead of 50 what would happen? 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.
An extra advantage is you won't have any payments to make during the last few years of the mortgage. Being mortgage free a few years early could easily be achieved by paying a bit extra now. You never get info like this from your lender. This sort of stuff is kept quiet by the industry.
If we look at the example where we paid 100 extra and knocked over 6 years off the length. 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. You get to sleep easy in the knowledge your payment will stay the same month after month. We also looked at potential savings by paying extra each month. Every little helps.
There are a few different types of mortgage, the fixed rate being only one of them. Usually for a period of several years, you get a fixed rate of interest. 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.
No matter what the average interest rate is, your rate will stay the same. There have been some alarming short term interest rate rises in our recent history. A rapid rise over a year or so could really see payments rise for those on standard variable mortgages.
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. Any sort of situation like this can cause unexpected charges by way of redemption penalties.
A redemption penalty is a charge that almost always comes with a fixed rate deal. You can get hit with a nasty charge when you are least expecting it. These unexpected charges can hurt. Consider carefully whether a fixed rate is the one for you.
During the term of your mortgage it's worth considering paying a bit extra each month if your budget will stretch. You may not realise but you can pay any amount over the minimum monthly payment. The lenders would love you to do this but they will rarely tell you that you can indeed pay extra.
What benefit does paying a bit extra each month have on you and your mortgage? You can shave several years off your mortgage term by paying slightly more each month. By paying a bit extra now, the savings mount up substantially later on.
What do you do with a mortgage overpayment calculator? You enter your mortgage details. The amount borrowed, the length, the interest rate etc. 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 to see how much money you could possibly save. Putting bigger figures in the overpayment box will show bigger savings and even more time saved.
There are astonishing amounts of savings to be had. Quick example, 25 year mortgage borrowing 100,000 at 5%. You could save over twelve thousand and shorten the mortgage by more than 3 years just by paying an extra 50 each month.
If you can afford to pay 100 extra instead of 50 what would happen? 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.
An extra advantage is you won't have any payments to make during the last few years of the mortgage. Being mortgage free a few years early could easily be achieved by paying a bit extra now. You never get info like this from your lender. This sort of stuff is kept quiet by the industry.
If we look at the example where we paid 100 extra and knocked over 6 years off the length. 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. You get to sleep easy in the knowledge your payment will stay the same month after month. We also looked at potential savings by paying extra each month. Every little helps.
About the Author:
Monty Burn was head of the Voluntary Mortgage Regulator until his sacking for helping too many people. Find out how to get the best fixed rate mortgage deal. You could shave years off and save thousands on your mortgage using our overpayment calculator on your mortgage.
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