mortagesandforeclosures

by Monty Burn

We are going to investigate what a fixed rate mortgage can do for 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.

Of the various types of mortgage available, the fixed rate is only one of them. A fixed period of interest that may be a couple or several years. The interest rate you pay is locked; therefore your monthly payments are also locked.

Are there any benefits to a fixed rate mortgage? Because your payments stay the same you don't get ups and downs in your monthly payments. You get to budget easier every month as your payments remain the same.

Bank base rates may rise drastically, however yours will be the same because it's fixed. In the last few decades we have seen interest rates almost double in a few short months. 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 think you may move home, or even have another child and need an extra bedroom, then think carefully before taking a fixed rate mortgage. 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. These redemption penalties can hit you hard just when you don't need 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. 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 can enter all the relevant figures from your particular deal. 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. It will tell you what sort of cash lump sum you can expect to save as well. 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 may be amazed by how much you could save. If we take a mortgage of 100,000 borrowed over 25 years and assume you get an average 5% interest rate. You could save over twelve thousand and shorten the mortgage by more than 3 years just by paying an extra 50 each month.

That example is paying just 50 extra every month. What if you could afford 100 a month to overpay? Using the same example mortgage from earlier we now pay 100 extra. You get to shave over 6 years off the length and over 20 grand saved. That's pretty good.

One more advantage is that the years you save are payment free, nothing at all to pay. 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.

If we go back to the extra 100 each month where we managed to shave six years off. You pay nothing more for the last 6 years of the term, which equates to about another 40 grand saved. This saving is yours as you will never need to give it to your lender as you originally planned.

We've looked at some of the advantages of a fixed rate mortgage. Regular payments and a good night sleep. We also looked at potential savings by paying extra each month. Every little helps.

About the Author:

Monty Burn was head honcho at the Voluntary Mortgage Regulator until they sacked him for helping the regular guy on the street save money. Read up on how to get a great fixed rate deal on your mortgage. 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-good-or-evil/