Should I Consider A Fixed Rate Mortgage - Why?
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We'll have a look at what benefits there are to a fixed rate mortgage for you. We will also look into how a mortgage overpayment calculator might save you lots of cash. With the fixed rate mortgage comes security. With the mortgage overpayment calculator comes potential savings.
A fixed rate mortgage is a special type of mortgage where you have a fixed interest period. A fixed period of interest that may be a couple or several years. Because the interest rate is fixed, so are your monthly payments.
What are the fixed rate mortgage good points? No need to worry about fluctuating interest rates. Your rate and your payments are fixed. You can plan your monthly spending easier knowing your mortgage won't go up unexpectedly.
Bank base rates may rise drastically, however yours will be the same because it's fixed. 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. If you think you may move home, or even have another child and need an extra bedroom, then think carefully before taking a fixed rate mortgage. These types of situations could invoke a nasty redemption penalty on your fixed rate mortgage.
A redemption penalty is a charge that almost always comes with a fixed rate deal. These charges can be pretty steep, and come at a time when you don't need the extra stress. If a charge like this will hurt you then you must think very carefully before taking a fixed rate mortgage.
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 do you do with a mortgage overpayment calculator? You input various figures relating to your mortgage. You can then play around by changing the figure you can afford to overpay.
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. Playing around with the actual overpayment figure can reveal that the more you can pay, the faster you finish your mortgage.
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. If you pay an extra fifty each month, you can shave more than 3 years off the length and save 12,000 in interest payments.
If you can afford to pay 100 extra instead of 50 what would happen? The same mortgage example but paying 100 extra every month. You get to shave over 6 years off the length and over 20 grand saved. That's pretty good.
Another benefit is that for the last few years of the original (25 year) term, you don't pay anything. 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.
In our example where we saved six years off the length with a hundred a month overpayment. A six year saving translates into about a forty grand saving in cash. This saving is yours as you will never need to give it to your lender as you originally planned.
To recap we had a look at what benefit a fixed rate mortgage has for you. Every month you pay the same so you get to sleep easy at night knowing this. We also looked at potential savings by paying extra each month. Every little helps.
Article Source: Articlelogy.com
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