mortagesandforeclosures

by Monty Burn

Let's find out just what a fixed rate mortgage is, and how it may benefit you. We will also look into how a mortgage overpayment calculator might save you lots of cash. 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. You get a fixed interest period for several years. Your interest rate, and therefore your payments are fixed.

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. You can plan your monthly spending easier knowing your mortgage won't go up unexpectedly.

It doesn't matter how much interest rates rise, your payments are fixed. In our recent history there have been some frightening short term interest rate rises. If the rates rose drastically over a short term those on variable mortgages could struggle to meet payments.

There are a few situations when a fixed rate mortgage may be a bad decision. 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. Any sort of situation like this can cause unexpected charges by way of redemption penalties.

Most fixed rate mortgages come tied to a nasty redemption penalty. When you can least afford it you could have a charge slapped on you. 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 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? You can easily shave years of your mortgage. Be debt free much earlier. You also save a lot of money in the process, sometimes a staggering amount.

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.

You get a resulting figure out of the calculator in years you can shave off. It also tells you what sort of financial saving you can expect to make. 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 you had a 25 year mortgage and borrowed 100 grand at 5% interest. By paying an extra fifty each month could save you over 3 years and 12 thousand.

That example is paying just 50 extra every month. What if you could afford 100 a month to overpay? We'll use the same mortgage example figures but pay 100 extra. In this new example the time saved is over six years and the financial saving is more than twenty thousand.

An extra advantage is you won't have any payments to make during the last few years of the mortgage. You could be free of the shackles of your mortgage early by paying a little more now. You won't hear this info from any lenders though. You need to discover info like this for yourself.

If we look at the example where we paid 100 extra and knocked over 6 years off the length. You pay nothing more for the last 6 years of the term, which equates to about another 40 grand saved. 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 looked into the future and saw some big savings if you can make a little overpayment now.

About the Author:

Monty Burn was head of the Voluntary Mortgage Regulator until his sacking for helping too many people. Read up on how to get a great fixed rate deal on your mortgage. Try our overpayment mortgage calculator and discover how to save shedloads of cash.

Get all the information and photos:: http://mortgagewide.info/standard-variable-mortgage-or-fixed-rate-mortgage/