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. 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. The interest rate is fixed, usually for a number of years. The interest rate you pay is locked; therefore your monthly payments are also locked.

Do fixed rate mortgages have any plus points? 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.

Bank base rates may rise drastically, however yours will be the same because it's fixed. There have been some alarming short term interest rate rises in our recent history. If the rates rose drastically over a short term those on variable mortgages could struggle to meet payments.

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

A redemption penalty is a charge that almost always comes with a fixed rate deal. These redemption penalties can hit you hard just when you don't need 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. You may not realise but you can pay any amount over the minimum monthly payment. You lender will not tell you it's possible to pay extra as they prefer you just pay the minimum.

Are there any advantages to paying a bit extra each month? You can shave several years off your mortgage term by paying slightly more each month. 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.

The calculator will show you how many years you can expect to shorten your mortgage by. It also tells you what sort of financial saving you can expect to make. The figures in years and cash saved will increase the more you overpay each month.

You may be surprised at some of the savings you can make. If you had a 25 year mortgage and borrowed 100 grand at 5% interest. You could save over twelve thousand and shorten the mortgage by more than 3 years just by paying an extra 50 each month.

Now an example of 100 extra instead of 50 extra. We'll use the same mortgage example figures but pay 100 extra. You can knock a staggering 6 years or more off the length and save yourself in the region of 20 thousand.

Another plus point is the years you knock off are totally payment free. 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. This is 40 grand in your pocket and not your lenders. Overpaying is difficult, make no mistake, but the rewards can be amazing.

To recap we had a look at what benefit a fixed rate mortgage has for you. You get a good night's sleep and regular level payments. Also consider the huge potential in making a little overpayment every month. Even small amounts will add 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! Find out how to get a top fixed rate mortgage deal at his site. 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-mortgages-what-do-they-do/