mortagesandforeclosures

by Monty Burn

We'll have a look at what benefits there are to a fixed rate mortgage for you. We'll then look at using 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 a special type of mortgage where you have a fixed interest period. A fixed period of interest that may be a couple or several years. Locked in interest rates mean locked in monthly payments.

What are the advantages of a fixed rate mortgage? No need to worry about fluctuating interest rates. Your rate and your payments are fixed. You can estimate your outgoings easier knowing your monthly payment is fixed.

No matter what the average interest rate is, your rate will stay the same. In the last few decades we have seen interest rates almost double in a few short months. You may struggle to meet your payments if you have a variable mortgage and rates rise suddenly.

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. Any sort of situation like this can cause unexpected charges by way of redemption penalties.

Fixed rate mortgages nearly always come bundled with a redemption penalty. These charges can be pretty steep, and come at a time when you don't need the extra stress. If a charge like this will hurt you then you must think very carefully before taking a fixed rate mortgage.

A consideration during your mortgage term is to pay a bit extra each month on top of your normal payment. It's not set in stone that you have to pay the same minimum amount every month. It's not often, if at all, that a lender will tell you it's possible to pay more than your normal minimum monthly payment.

What are the up sides to paying extra each and every 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 then play around by changing the figure you can afford to overpay.

The calculator will show you how many years you can expect to shorten your mortgage by. It also gives you a figure in cash that you can expect to save. 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 surprised at some of the savings you can make. Quick example, 25 year mortgage borrowing 100,000 at 5%. If you pay an extra fifty each month, you can shave more than 3 years off the length and save 12,000 in interest payments.

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. In this new example the time saved is over six years and the financial saving is more than twenty thousand.

One more advantage is that the years you save are payment free, nothing at all to pay. Being mortgage free a few years early could easily be achieved by paying a bit extra now. You will never hear this from your lender though; it's simply not in their interests to tell you to pay off early.

In the example where we paid an extra 100 every month and shortened the mortgage by six years. A six year saving translates into about a forty grand saving in cash. You can do what you like with this extra as it never needs to be paid to your lender.

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:

Grab a FREE copy of Monty's Mortgage Bible, the book that caused the Voluntary Mortgage Regulator to sack him. Find out how to get the best fixed rate mortgage deal. With a mortgage overpayment calculator you could discover how to cut years off your mortgage.

Get all the information and photos:: http://mortgagewide.info/with-a-fixed-rate-mortgage-you-can-ignore-rate-rises/