mortagesandforeclosures

by Monty Burn

We are going to investigate what a fixed rate mortgage can do for you. Then prepare to be amazed at the savings made with a mortgage overpayment calculator. You get security from the fixed rate mortgage & you may get a nice surprise from the overpayment calculator.

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

What, if any, are the up sides to fixed rate mortgages? You benefit by not having the yo-yo effect on your monthly payments. They stay the same every month. You can plan your monthly spending easier knowing your mortgage won't go up unexpectedly.

If the bank base interest rate starts to rise, yours will stay as it is. In the not too distant past there have been some real scary rate rises. People on variable rate mortgages are much more likely to be affected by rapid rises in interest rates.

Under certain circumstances, a fixed rate mortgage could be a mistake. If you suddenly have an extra family member and need more space. Or you are simply considering moving home soon. These types of situations could invoke a nasty redemption penalty on your fixed rate mortgage.

Fixed rate mortgages nearly always come bundled with a redemption penalty. At a time when you least need it, you could get hit with a redemption penalty. These unexpected charges can hurt. Consider carefully whether a fixed rate is the one for you.

One thing to consider while having the mortgage is to pay a bit extra every month if you can afford it. You may not realise but you can pay any amount over the minimum monthly payment. You lender will prefer you make the minimum payment and will never tell you it's possible to pay extra.

Are there any advantages to paying a bit extra each month? If you consistently pay extra in the early years of your agreement you can knock several years off the length. You can save a shedload of cash as well as knock a few years off.

In what way does a mortgage overpayment calculator work? You input various figures relating to your mortgage. You can enter a figure that you may think about paying as an extra payment each month.

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. Both the years and cash saved obviously increase if you put in a higher overpayment figure.

You might be pleasantly surprised at the savings to be made. As an example, borrow 100,000 at 5% over 25 years. You could save over twelve thousand and shorten the mortgage by more than 3 years just by paying an extra 50 each month.

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

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 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 don't pay this money to your lender so you get to keep it, either save it or spend it.

In conclusion we listed a few benefits of a fixed rate mortgage. Every month you pay the same so you get to sleep easy at night knowing this. 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 once in charge of the Voluntary Mortgage Regulator. He was forced out becuase he was saving borrowers too much cash! Get a great fixed rate mortgage deal here. Maybe have a play with our mortgage overpayment calculator and shock yourself at how much cash you could save.

Get all the information and photos:: http://mortgagewide.info/fixed-rate-mortgage-could-let-you-sleep-easier/