Financial Planning Made Easy With A Fixed Rate Mortgage

June 1st, 2009 by Monty Burn

by Monty Burn

Well take a look at fixed rate mortgages and how they can be good for you. We’ll also take a peek at how much you could save with an overpayment calculator. Security comes with the fixed rate mortgage, whereas huge savings can come with 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. If the interest rate remains static, so do your monthly payments.

Do fixed rate mortgages have any plus points? 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.

It doesn’t matter how much interest rates rise, your payments are fixed. In our lifetime we have already seen some distressing interest rate rises. People on variable rate mortgages are much more likely to be affected by rapid rises in interest rates.

There are a few situations when a fixed rate mortgage may be a bad decision. 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. Either of these events will cause you to trigger an unwanted redemption penalty.

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.

During the term of your mortgage it’s worth considering paying a bit extra each month if your budget will stretch. It’s not set in stone that you have to pay the same minimum amount every month. You lender will not tell you it’s possible to pay extra as they prefer you just pay the minimum.

What are the up sides to paying extra each and every month? You can easily shave years of your mortgage. Be debt free much earlier. Not only do you save years but you save piles of cash, usually many thousands.

What do you do with a mortgage overpayment calculator? You input various figures relating to your mortgage. You can enter a figure that you may think about paying as an extra payment each month.

The calculator tells you how many years you will knock off. You get the expectant cash saving 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 surprised at some of the savings you can make. 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? Paying 100 extra every month using the same example mortgage. 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. It’s definitely a reality for you to be free of your mortgage years before planned. Lenders will not tell you this, they like to keep this a secret.

If we go back to the extra 100 each month where we managed to shave six years off. No payments for 6 years means another 40 thousand saved in monthly payments. 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 to sleep easy in the knowledge your payment will stay the same month after month. We also looked at potential savings by paying extra each month. Every little helps.

About the Author:

The Voluntary Mortgage Regulator got rid of Monty as chief because he was actually saving punters too much cash! Find out how to get the best fixed rate mortgage deal. You could shave years off and save thousands on your mortgage using our overpayment calculator on your mortgage.