Let’s find out just what a fixed rate mortgage is, and how it may benefit you. We’ll then take a look at an overpayment calculator for your mortgage. Security comes with the fixed rate mortgage, whereas huge savings can come with the overpayment calculator.

Of the various types of mortgage available, the fixed rate is only one of them. You get a fixed interest period for several years. The interest rate you pay is locked; therefore your monthly payments are also locked.

What are the advantages of a fixed rate mortgage? No need to worry about fluctuating interest rates. Your rate and your payments are 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. In the last few decades we have seen interest rates almost double in a few short months. You may struggle to meet your payments if you have a variable mortgage and rates rise suddenly.

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. In situations like these you may need to redeem the mortgage and pay a hefty redemption penalty on the fixed rate mortgage.

A redemption penalty is a charge that almost always comes with a fixed rate deal. When you can least afford it you could have a charge slapped on you. You must think twice before agreeing to a fixed rate deal if a charge like this will badly affect you.

A consideration during your mortgage term is to pay a bit extra each month on top of your normal payment. It’s not set in stone that you have to pay the same minimum amount every month. 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.

What are the best reasons to paying a bit extra every month? You can shave several years off your mortgage term by paying slightly more each month. Not only do you save years, you can also save thousands and thousands of your hard earned money.

In what way does a mortgage overpayment calculator work? You input various figures relating to your mortgage. You can then play around by changing the figure you can afford to overpay.

You get a resulting figure out of the calculator in years you can shave off. 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.

You may be surprised at some of the savings you can make. Quick example, 25 year mortgage borrowing 100,000 at 5%. 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.

Now an example of 100 extra instead of 50 extra. We’ll use the same mortgage example figures but pay 100 extra. You can knock a staggering 6 years or more off the length and save yourself in the region of 20 thousand.

Another plus point is the years you knock off are totally payment free. By paying a little extra now, you could easily be mortgage free well before you ever expected. You never get info like this from your lender. This sort of stuff is kept quiet by the industry.

In the example where we paid an extra 100 every month and shortened the mortgage by six years. A six year saving translates into about a forty grand saving in cash. You can do what you like with this extra as it never needs to be paid to your lender.

In conclusion we listed a few benefits of a fixed rate mortgage. Not only do you get set monthly payments, you get to sleep easy at night because of it. We also had a look at a mortgage overpayment calculator and the potential savings that can be had.

Related posts:

1. Claw Back Some Killer Cash With A Mortgage Overpayment Calculator
2. Why a Fixed-rate Mortgage May Be Better for First-Time Homebuyer
3. Steps To Lower The Interest Paid On Your Mortgage
4. Locking a Mortgage Rate in a Volatile Market
5. Is an Interest-only Loan Right For You?

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This entry was posted on Monday, May 25th, 2009 at 2:19 am and is filed under Mortgages. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.