Fixed Rate Mortgages - Are They Worth It?
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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.
Of the various types of mortgage available, the fixed rate is only one of them. You get a fixed interest period for several years. Your interest rate, and therefore your payments are fixed.
What are the advantages of a fixed rate mortgage? A fixed rate of interest means a fixed monthly mortgage payment. It's a lot easier to plan financially knowing your payment will be the same.
No matter what the average interest rate is, your rate will stay the same. In the not too distant past there have been some real scary rate rises. A rapid rise over a year or so could really see payments rise for those on standard variable mortgages.
Under certain circumstances, a fixed rate mortgage could be a mistake. Moving home in the next year or so. Having a planned or even unplanned child can be reasons to avoid fixed rate mortgages. Any sort of situation like this can cause unexpected charges by way of redemption penalties.
Nearly all fixed rate mortgages have a redemption penalty attached. These redemption penalties can hit you hard just when you don't need it. You must think twice before agreeing to a fixed rate deal if a charge like this will badly affect you.
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. 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 best reasons to paying a bit extra every month? If you consistently pay extra in the early years of your agreement you can knock several years off the length. By paying a bit extra now, the savings mount up substantially later on.
What do you do with a mortgage overpayment calculator? Enter all the figures that relate to your mortgage. You then enter any extra amount you can afford to pay. Or enter various value for fun.
You get to see what sort of length in years you can knock off. You get the expectant cash saving as well. 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. By paying an extra fifty each month could save you over 3 years and 12 thousand.
Nice savings on a 50 extra payment. But what happens if you pay an extra 100 though? Using the same example mortgage from earlier we now pay 100 extra. You can save 20 thousand in cash. You can also shorten your mortgage by more than 6 years.
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. You won't hear this info from any lenders though. You need to discover info like this for yourself.
In our example where we saved six years off the length with a hundred a month overpayment. You pay nothing more for the last 6 years of the term, which equates to about another 40 grand saved. This is money you can spend or save as it's not going to your lender every month.
In this article we've looked at the potential of fixed rate mortgages. Regular payments and a good night sleep. We also looked at potential savings by paying extra each month. Every little helps.
Article Source: Articlelogy.com
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