mortagesandforeclosures

by Monty Burn

Let's find out just what a fixed rate mortgage is, and how it may benefit you. Then prepare to be amazed at the savings made with a mortgage overpayment calculator. From definite security with the fixed rate mortgage to potential cash saved with the overpayment calculator.

A fixed rate mortgage is one of the various types available. The interest rate is fixed, usually for a number of years. If the interest rate remains static, so do your monthly payments.

What, if any, are the up sides to fixed rate mortgages? A fixed rate of interest means a fixed monthly mortgage payment. It's a lot easier to plan financially knowing your payment will be the same.

No matter what the average interest rate is, your rate will stay the same. In our recent history there have been some frightening short term interest rate rises. Being on a variable rate leaves you susceptible to the rapid rise of your monthly payment.

A fixed rate mortgage could be a mistake for you under certain circumstances. 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. Any sort of situation like this can cause unexpected charges by way of redemption penalties.

Fixed rate mortgages usually come with charges called redemption penalties. 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.

During the term of your mortgage it's worth considering paying a bit extra each month if your budget will stretch. You don't have to make the same payment month after month for 25 years. You lender will not tell you it's possible to pay extra as they prefer you just pay the minimum.

If you do pay extra each month, are there any benefits to this? The extra payments reduce the sum owed quicker and the result is you save years off the term of your deal. Not only do you save years but you save piles of cash, usually many thousands.

How do you use a mortgage overpayment calculator? You enter your mortgage details. The amount borrowed, the length, the interest rate etc. You can then play around by changing the figure you can afford to overpay.

The calculator will then tell you how many years you might reduce your mortgage by. It will tell you what sort of cash lump sum you can expect to save as well. Both the years and cash saved obviously increase if you put in a higher overpayment figure.

You may be amazed by how much you could save. As an example, borrow 100,000 at 5% over 25 years. Just by paying an extra 50 every month could see you knock over 3 years off and save over 12 grand.

If you can afford to pay 100 extra instead of 50 what would happen? The same mortgage example but paying 100 extra every month. In this new example the time saved is over six years and the financial saving is more than twenty thousand.

Another benefit is that for the last few years of the original (25 year) term, you don't pay anything. Being mortgage free a few years early could easily be achieved by paying a bit extra now. You won't hear this info from any lenders though. You need to discover info like this for yourself.

In our example where we saved six years off the length with a hundred a month overpayment. No payments for 6 years means another 40 thousand saved in monthly payments. This saving is yours as you will never need to give it to your lender as you originally planned.

In conclusion we listed a few benefits of a fixed rate mortgage. Regular payments and a good night sleep. We also had a look at the savings to be made by paying a bit extra every month. It all adds up.

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 a top fixed rate mortgage deal at his site. You could also try our overpayment calculator on your mortgage and see what you could save.

Get all the information and photos:: http://mortgagewide.info/benefits-of-a-fixed-rate-mortgage/