Products and terms
Blend and extend
A mid-term arrangement with your current lender that blends your existing rate with a new one over a longer term, so you avoid a prepayment penalty.
If you want a different rate or more money partway through a term, breaking the mortgage triggers a penalty. A blend and extend keeps the mortgage in place. The lender combines your existing rate with its current rate, weighted by the balance and the time remaining, and starts a new, longer term at the blended rate.
You still pay for it. The penalty you avoided is usually priced into the blend, and because only your current lender can offer one, no other lender is competing for your business. Some lenders blend generously and some don't.
It's most useful in 2 cases: when you need more money mid-term and the penalty to refinance elsewhere would be large, and when rates have fallen a lot and you have years left in your term.
Always price it against the alternative. Get the exact penalty to break in writing, get a competing rate held elsewhere, and compare the total cost of both options over the same period.
Related terms
Prepayment penalty
The charge for paying off a closed mortgage early: 3 months of interest on a variable, or the greater of that and the IRD on a fixed.
Interest-rate differential (IRD)
A prepayment penalty calculated from the gap between your rate and a comparison rate, applied over the months left in your term.
Refinance
Replacing your mortgage with a larger one and taking the difference in cash, capped at 80% of the property's value.
This definition describes how the term is used in Canadian residential mortgage lending. It’s general information, not advice on your file. Rules, thresholds and rates change. Where a figure is quoted, it’s current as of the date shown on the related guide.
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Ask Daniel about this term
Daniel De Sousa, Mortgage Associate, can walk you through it before you sign anything. Or get a rate quote: 6 questions, about two minutes, and no credit check to start.
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