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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. A fixed period of interest that may be a couple or several years. Your interest rate, and therefore your payments are fixed.

Are there any benefits to a fixed rate mortgage? You benefit by not having the yo-yo effect on your monthly payments. They stay the same every month. You can estimate your outgoings easier knowing your monthly payment is fixed.

Bank base rates may rise drastically, however yours will be the same because it’s fixed. In our lifetime we have already seen some distressing interest rate rises. 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. The arrival of a new child could mean you need a bigger home and need to move. These are reasons to avoid fixed rate mortgages. Any situation which sees you changing mortgage can invoke a horrid redemption penalty on you.

Fixed rate mortgages usually come with charges called redemption penalties. When you can least afford it you could have a charge slapped on you. 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. You may not realise but you can pay any amount over the minimum monthly payment. 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. Not only do you save years but you save piles of cash, usually many thousands.

What does a mortgage overpayment calculator do? You enter your mortgage details. The amount borrowed, the length, the interest rate etc. You can put various amounts in as the overpayment. Feel free to play around with this figure.

The calculator tells you how many years you will knock off. It also tells you what sort of financial saving you can expect to make. Both the years and cash saved obviously increase if you put in a higher overpayment figure.

Some of the savings can be staggering. Quick example, 25 year mortgage borrowing 100,000 at 5%. By paying an extra fifty each month could save you over 3 years and 12 thousand.

The last example was an overpayment of 50 every month, but what happens if you pay 100 extra. Paying 100 extra every month using the same example mortgage. In this new example the time saved is over six years and the financial saving is more than twenty thousand.

An extra advantage is you won’t have any payments to make during the last few years of the mortgage. It’s definitely a reality for you to be free of your mortgage years before planned. You won’t hear this info from any lenders though. You need to discover info like this for yourself.

If we look at the example where we paid 100 extra and knocked over 6 years off the length. 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.

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.