mortagesandforeclosures

by Monty Burn

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

A fixed rate mortgage is one of the various types available. You get a fixed interest period for several years. If the interest rate remains static, so do your monthly payments.

Are there any benefits to a fixed rate mortgage? Your payment is fixed because your particular interest rate is fixed. You can plan your monthly spending easier knowing your mortgage won't go up unexpectedly.

Your payment is locked so it really doesn't matter what the general rates are doing. 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.

A fixed rate mortgage could be a mistake for you under certain circumstances. You may decide you need to move house, or even have an unexpected child and simply need more room. These types of situations could invoke a nasty redemption penalty on your fixed rate mortgage.

Most fixed rate mortgages come tied to a nasty redemption penalty. You can get hit with a nasty charge when you are least expecting it. There is never a good time to be hit with extra charges so think carefully before taking the fixed rate mortgage.

It's worth thinking about paying a bit extra each month in addition to whatever you normally pay. It's not set in stone that you have to pay the same minimum amount every month. Lenders prefer you to make payments like this but they never inform you that you could pay extra if you wish.

What are the up sides to paying extra each and every month? The extra payments reduce the sum owed quicker and the result is you save years off the term of your deal. You also save a lot of money in the process, sometimes a staggering amount.

How do overpayment calculators work? You can enter all the relevant figures from your particular deal. You then enter any extra amount you can afford to pay. Or enter various value for fun.

The calculator tells you how many years you will knock 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 may be amazed by how much you could save. If you had a 25 year mortgage and borrowed 100 grand at 5% interest. Making an overpayment of 50 every month will save you 12,000 and knock over 3 years off.

The last example was an overpayment of 50 every month, but what happens if you pay 100 extra. The same mortgage example but paying 100 extra every month. You can save 20 thousand in cash. You can also shorten your mortgage by more than 6 years.

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. Of course your lender will never tell you this, you have to discover this on your own.

If we go back to the extra 100 each month where we managed to shave six years off. This shortening of the mortgage by six years saves you another 40,000 or more. You can do what you like with this extra as it never needs to be paid to your lender.

There you have a few benefits of going for a fixed rate mortgage. You get to sleep easy in the knowledge your payment will stay the same month after month. 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 honcho at the Voluntary Mortgage Regulator until they sacked him for helping the regular guy on the street save money. Find out how to get a top fixed rate mortgage deal at his site. With a mortgage overpayment calculator you could discover how to cut years off your mortgage.

Get all the information and photos:: http://mortgagewide.info/not-as-good-as-sex-but-worth-giving-a-fixed-rate-mortgage-a-try/