Blend and Extend Mortgage Calculator
A blended mortgage is a type of mortgage refinancing that lets you blend your existing mortgage rate with the rates currently being offered by your mortgage lender. You're able to partially get today's new rates without having to pay any mortgage prepayment penalties for renewing your mortgage early. You can also choose to borrow more money by accessing your home equity. Use the blend and extend mortgage calculator below to find out how much your blended mortgage rate will be.
How to Use This Blend and Extend Mortgage Calculator
This blended mortgage calculator lets you calculate your blended mortgage rate, blended mortgage amount, and blended mortgage term.
Current Mortgage Terms:
Blend and Extend or Blend to Term: This is the type of blended mortgage that you want to calculate. Blend and extend lets you extend (renew) your mortgage for another term at the new blended mortgage rate. With a blend to term, your new blended mortgage rate will only apply to the remaining term of your original mortgage.
Mortgage Amount Outstanding: The remaining amount of your mortgage, which is the amount that you still currently owe.
Mortgage Interest Rate: Your current mortgage rate.
Original Mortgage Term: The term length of your mortgage.
Mortgage Term Remaining: The months or years remaining until the end of your mortgage term.
New Mortgage Terms:
Additional Mortgage Amount: You can choose to borrow more money by accessing your home equity. For example, if your mortgage outstanding was $500,000 and you borrow an additional amount of $100,000, your blended mortgage amount would be $600,000.
Mortgage Interest Rate: The mortgage rate offered by your lender for a certain mortgage term length.
New Mortgage Term: The term length of a new mortgage. If you choose to calculate a Blend to Term mortgage, your new mortgage term will simply be the mortgage term remaining on your old mortgage.
Results:
Blended Mortgage Rate: This is your new blended mortgage rate.
Blended Mortgage Amount: The amount you owe on your new blended mortgage.
Blended Mortgage Term: The term length of your new blended mortgage.
Blend and Extend Mortgages
A "blended mortgage" is when you blend two mortgage rates, your current mortgage rate and a mortgage renewal rate, into one mortgage rate. This allows you to "renew" your mortgage by mixing in a new mortgage rate before your mortgage renewal date, which means that you can avoid breaking your mortgage and paying prepayment penalties.
Blend and extend mortgages allow you to renew early or refinance your mortgage without penalties. Your blended mortgage rate will be somewhere between your existing mortgage rate and your mortgage renewal rate. Blend and extend mortgages are for a new term, and not just for the remaining length of your term.
For example, let's look at a 5-year fixed mortgage that has three years left in its term. It currently has a mortgage rate of 3%, but your mortgage lender is offering 2% for mortgage renewals. You don't want to pay the significant mortgage penalties upfront, which can amount to tens of thousands of dollars, but you still want to take advantage of the low mortgage rate being offered. You can get a blended mortgage to blend the new rate into your mortgage.
You will get a blended rate somewhere in between your existing rate of 3% and the new 5-year rate of 2%, such as 2.50%. This blended rate is then extended for another mortgage term, which will be 5-years in this case. Some banks may still charge a prepayment penalty or charge administrative fees, but it will most likely not be charged upfront. Instead, these penalties and fees will be added to your blended mortgage. For example, after accounting for penalties and fees, your blended rate might be 2.60%.
How to Calculate Blended Mortgage Rates
You can blend and extend a fixed mortgage at any time if your lender allows blended mortgages. Your blended mortgage rate will be weighted based on the time remaining in your mortgage term.
For example, let's say that you have a 5-year (60-month) fixed mortgage at 3% with three years (36 months) left in its term. Your lender is currently offering a 5-year fixed mortgage rate of 2%.
You have already completed 3 years out of 5 years of your mortgage term, so there is more weight on the new mortgage rate of 2% for the remaining 2 years. Another way to look at this is to calculate the percentage weights.
- Three years completed out of a 5-year term = 60% complete
- 2 years remaining out of a 5-year term = 40% remaining
Your old 3% rate will remain for 40% of a new term, while the new 2% rate will account for 60% of a new term.
- (40% x 3%) + (60% x 2%) = 2.40%
Your mortgage will be immediately renewed at a blended rate of 2.40% for another 5-year term.
1. Calculate the time remaining in your current term
Three years have passed for a 5-year term, which means that there are still 2 years (24 months) left. You should have had a 3% rate for the remaining 2 years. To weight this portion, multiply your rate by the months remaining: 3% x 24 months = 72
2. Calculate the time remaining for a new term
A new term would be for 5-years, but since you already have 2 years left in your existing term, the new term of 5-years will be blended in for a partial duration. To weight this portion, first subtract the time remaining on your term from the length of the new term: 5 years - 2 years = 3 years (36 months)
You will then weight this portion by multiplying the new mortgage rate offered by the years remaining: 2% x 36 months = 72
3. Blend the portions together
The two portions will be blended together by adding them up: 72 + 72 = 144
4. Divide by the new term length
The new term length is 5-years (60 months). Divide the combined blended portions by the new term length to get your blended rate: 144 / 60 months = 2.40%
Your blended mortgage rate will be 2.40% for a new 5-year term.
Blend to Term Mortgages
The opposite calculation would be used for a blend to term, which is a blended mortgage only for the remaining length of your term. This is different from a blend and extend, which renews your mortgage for another term.
With a blend to term, your new mortgage rate will only be weighted based on the time left on your term.
Using the same example as above, your new 2% rate will only last for the two years remaining:
- (60% x 3%) + (40% x 2%) = 2.60%
A blend to term will have a blended rate of 2.60% for the remaining two years.
The less time there is on the term, the less impact the new rate will have on the blended rate. If only one year was remaining at 2%, then the blended rate would be 2.80% for the remaining one year.
- (80% x 3%) + (20% x 2%) = 2.80%