Blended Rate Mortgages

From the day we sign our mortgage papers, the market is never the same. In some cases market fluctuations aren’t a big deal for borrowers. On the other hand, strong market shifts can make a difference and directly effect mortgage interest rates.

If it’s time for you to refinance your mortgage and you notice that the interest rate has dropped tremendously since you negotiated your terms, or you’re not gainfully employed but you’re not sure if you want to refinance completely, there is hope. That hopes comes in the form of a blended rate mortgage.

What is a blended rate mortgage?

This type of mortgage is named as such because it is a combination of your old mortgage and a new loan amount. It is often seen as an alternative to refinancing because the new loan amount is added to your current mortgage.

Instead of taking out a new loan entirely, you can turn two home loans into one and save on the additional interest costs that would accompany refinancing. With a blended rate mortgage, you cannot transfer it to another property if you move; it can only be used for your current home.

What are the benefits of a blended rate mortgage?

Blended rate mortgages provide homeowners with many benefits besides saving you money on the extra interest costs associated with refinancing.

• Home renovations: Planning on doing some work to your property but not sure where to get the funds? Adding on to your current mortgage gives you access to equity in the form of cash you can use for renovations.
• Rate changes: If interests have dropped and your current rate is too high, by blending your mortgage, you are also blending the interest rates creating a more affordable loan.
• Extending your loan: With a blended rate mortgage you have the option to extend your existing mortgage. This is called ‘blending and extending,’ and can also save you money on interest because you will be combining your original mortgage rate with whatever the current lower rate is.

Should I switch my mortgage to a blended one?

If you’re unsure as to whether or not you should take on a blended rate mortgage, talk to your broker. These mortgages offer many of the aforementioned benefits, but they are not suited for everyone’s financial situation. Your mortgage broker can offer insights and information regarding refinancing and if switching to a blended rate is the right choice for you.