Fixed rate

If you know that you’re planning on staying in your new home for a long time, and you want the stability of knowing your monthly payment will stay the same no matter what, a fixed rate loan might be for you. However, this all depends on the prevailing interest rate at the time that you take out the initial loan.

For instance, if interest rates are currently low but they’re projected to go up in the near future, it would be in your best interest to lock in that lower rate. However, if rates are trending downward, it might be better to have a variable loan in which your interest rates falls with overall interest rates.

In order to get the lender to commit to lending you the money over the full term of the mortgage, you pay a slightly higher interest rate than you would with an Adjustable Rate Mortgage Loan (ARM). However, if interest rates fall, you may choose to refinance to a lower rate. This can either reduce your monthly payments, shorten your term, or help you get cash out of the equity you’ve built in your home. 

Fixed Rate Mortgages are typically available with terms of 10, 15, 20, 25 or 30 years. To calculate mortgage payments (amortization), the loan amount is divided by the number of months in the term, and tax and insurance are added. Payments for 15 and 20 year terms will be higher than a 30 year loan because they are amortized over a shorter period of time. The shorter this period, the higher the actual payment, but the greater the savings in the amount of interest paid over the life of the loan. For example, a 15 year fixed term will result in paying off your mortgage in 1/2 the time, with huge savings to you in terms of the interest you pay. This could be an important consideration if you are nearing retirement or have other large expenses to cover, such as your child's education.

Use the mortgage calculator on our “Smart” page or reach out to a NOVA Loan Officer today to discuss whether a fixed rate or adjustable rate mortgage is right for you.