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. This calculator assumes that your interest rate for your current term stays the same, and the current interest rate applies to any new money you borrow together with any time you add to your mortgage term. The rate offered by a specific lender may differ from the result of this calculation.
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.
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.
Current Mortgage Terms:
Mortgage Amount Outstanding: The current balance of your mortgage, representing the amount you still owe. You can view this balance by logging into your mortgage lender's online portal.
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 borrow more money by accessing your home equity. For example, if your mortgage outstanding was $500,000 and you borrowed an additional $100,000, your blended mortgage amount would be $600,000. Note that your mortgage cannot exceed 80% of your home value.
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%.
- 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 renew at a blended rate of 2.40% for a 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
In a blend to term scenario you blend your current mortgage with a new mortgage whose term equals the remaining time on your current mortgage term. For example assume your mortgage rate is 3%, your remaining mortgage balance is $400,000 and the remaining term on your mortgage is 3 years. If the three-year term mortgage rate offered by your lender is currently 4% and you are able to borrow another $100,000 against your home, the weight of your old mortgage would be
- $400,000/($400,000+$100,000) = 80%,
and the weight of your new advance would be
- $100,000/($400,000+$100,000) = 20%.
Your blended rate would be
- 80%*3%+20%*4% = 3.2%.
Disclaimer:
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