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.

What are the advantages of a fixed rate mortgage? Your payment is fixed because your particular interest rate is fixed. You can estimate your outgoings easier knowing your monthly payment is fixed.

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.

There are a few situations when a fixed rate mortgage may be a bad decision. You may decide you need to move house, or even have an unexpected child and simply need more room. In situations like these you may need to redeem the mortgage and pay a hefty redemption penalty on the fixed rate mortgage.

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.

If you do pay extra each month, are there any benefits to this? 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, you can also save thousands and thousands of your hard earned money.

How do overpayment calculators work? It uses figures from your mortgage. Amount, interest rate, length of term etc. 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. 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. If we take a mortgage of 100,000 borrowed over 25 years and assume you get an average 5% interest rate. You could save over twelve thousand and shorten the mortgage by more than 3 years just by paying an extra 50 each month.

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.

Another plus point is the years you knock off are totally payment free. You could be free of the shackles of your mortgage early by paying a little more now. 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. This saving is yours as you will never need to give it to your lender as you originally planned.

In conclusion we listed a few benefits of a fixed rate mortgage. Every month you pay the same so you get to sleep easy at night knowing this. Also consider the huge potential in making a little overpayment every month. Even small amounts will add up.