Let’s find out just what a fixed rate mortgage is, and how it may benefit you. We’ll then look at using a mortgage overpayment calculator. From definite security with the fixed rate mortgage to potential cash saved 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. Locked in interest rates mean locked in monthly payments.

Do fixed rate mortgages have any plus points? Because your payments stay the same you don’t get ups and downs in your monthly payments. You get to budget easier every month as your payments remain the same.

Your payment is locked so it really doesn’t matter what the general rates are doing. 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.

A fixed rate mortgage could be a mistake for you under certain circumstances. 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 situation which sees you changing mortgage can invoke a horrid redemption penalty on you.

Fixed rate mortgages usually come with charges called redemption penalties. You can get hit with a nasty charge when you are least expecting it. Think hard before you take a fixed rate mortgage as these charges can really disrupt your plans.

A consideration during your mortgage term is to pay a bit extra each month on top of your normal payment. You are not tied to make the same payments for the duration of the mortgage, usually 25 years. 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 benefit does paying a bit extra each month have on you and your mortgage? Topping up your monthly minimum payment means you can knock a few years of the length of your mortgage. Not only do you save years but you save piles of cash, usually many thousands.

What does a mortgage overpayment calculator do? Enter all the figures that relate to your mortgage. You also enter a figure that you want to overpay. You can 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.

You might be pleasantly surprised at the savings to be made. If you had a 25 year mortgage and borrowed 100 grand at 5% interest. Making an overpayment of 50 every month will save you 12,000 and knock over 3 years off.

That example is paying just 50 extra every month. What if you could afford 100 a month to overpay? The same mortgage example but paying 100 extra every month. You can knock a staggering 6 years or more off the length and save yourself in the region of 20 thousand.

An extra benefit is the years you save are free from any payment whatsoever. By paying a little extra now, you could easily be mortgage free well before you ever expected. You never get info like this from your lender. This sort of stuff is kept quiet by the industry.

If we go back to the extra 100 each month where we managed to shave six years off. You pay nothing more for the last 6 years of the term, which equates to about another 40 grand saved. You don’t pay this money to your lender so you get to keep it, either save it or spend it.

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.