We’ll have a look at what benefits there are to a fixed rate mortgage for you.
We’ll also take a peek at how much you could save with an overpayment calculator.
With the fixed rate mortgage comes security. With the mortgage overpayment calculator comes potential savings.

There are a few different types of mortgage, the fixed rate mortgage being only one of them.
The interest rate is fixed, usually for a number of years.
The interest rate you pay is locked; therefore your monthly payments are also locked.

What are the fixed rate mortgage good points?
Because your payments stay the same you don’t get ups and downs in your monthly payments.
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 our lifetime we have already seen some distressing interest rate rises.
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.
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.
In situations like these you may need to redeem the mortgage and pay a hefty redemption penalty on the fixed rate mortgage.

Fixed rate mortgages usually come with charges called redemption penalties.
You can get hit with a nasty charge when you are least expecting it.
If a charge like this will hurt you then you must think very carefully before taking a 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 are not tied to make the same payments for the duration of the mortgage, usually 25 years.
It’s not often, if at all, that a lender will tell you it’s possible to pay more than your normal minimum monthly payment.

If you do pay extra each month, are there any benefits to this?
If you consistently pay extra in the early years of your agreement you can knock several years off the length.
By paying a bit extra now, the savings mount up substantially later on.

In what way does a mortgage overpayment calculator work?
You enter your mortgage details. The amount borrowed, the length, the interest rate etc.
You then enter any extra amount you can afford to pay. Or enter various value for fun.

The calculator tells you how many years you will knock off.
You get to see how much money you could possibly save.
If you play around with the overpayment figure you can see that the more you overpay the more you save, in cash and years.

You might be pleasantly surprised at the savings to be made.
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.

The last example was an overpayment of 50 every month, but what happens if you pay 100 extra.
The same mortgage example but paying 100 extra every month.
This saves you more than 20,000 and knocks a respectable 6 years off the term.

One more advantage is that the years you save are payment free, nothing at all to pay.
Being mortgage free a few years early could easily be achieved by paying a bit extra now.
You will never hear this from your lender though; it’s simply not in their interests to tell you to pay off early.

In the example where we paid an extra 100 every month and shortened the mortgage by six years.
This shortening of the mortgage by six years saves you another 40,000 or more.
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.
You get a good night’s sleep and regular level payments.
Also consider the huge potential in making a little overpayment every month. Even small amounts will add up.

Tags: mortgage overpayment calculator, business, family, real estate, mortgage rates, mortgage deals, finance

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