Blend & Extend Calculator

What the Blend and Extend Calculator does

You are partway through a mortgage term and you need more money, or you want to move, or rates have fallen far enough that your current rate looks expensive. Your lender will offer to blend: keep the existing mortgage alive, mix your current rate with a new one, and carry on. The alternative is to break the mortgage, pay a penalty, and start fresh at whatever the market is offering. This page prices both, plus porting, and shows which is actually cheaper over the term rather than which sounds cheaper on the phone.

The blended rate itself is not complicated — it is a dollar-weighted average of what you owe now and what you are adding. What makes the decision hard is that breaking carries a penalty that can run into five figures, and a blend hides its cost inside a rate you will carry for years. Those two costs are not comparable until you put them on the same horizon, which is what this calculator exists to do.

• Your blended rate, both with and without extending the term
• The penalty to break instead, under both the monoline and big-bank methods
• Total cost over your chosen horizon for blending, porting and breaking, side by side
• The balance still owing at the end of the term under each option
• The gap between the cheapest option and the next one, so you know how much the decision is worth

Blend and extend against blend to term

There are two versions of a blend and lenders are not always careful about which one they are quoting.

A blend to term keeps your existing maturity date. Your remaining months stay remaining, and the new money is priced over that same shortened window. A blend and extend resets the clock to a full new term — typically five years — and because a five-year rate is usually priced differently than the eighteen months you had left, the weighted average changes. Extending also means you are re-committing to the lender for the full new term, which is precisely why they prefer to offer it.

The calculator shows both figures. If the extend rate is lower, that is not free: you have traded a shorter commitment for a longer one, and you have given up the chance to shop the whole balance at your original maturity date. If it is higher, extending is buying you rate certainty for longer. Neither is automatically right, but you should know which one you are being offered.

• Blend to term — existing maturity date is kept, new money priced over the months remaining
• Blend and extend — the term resets to a full new one, usually five years
• The weighted average uses dollars, not time: a large existing balance dominates the result
• Extending re-commits you to the same lender for the whole new term
• A lower extend rate is a trade, not a discount — you are paying for it in flexibility

How this is actually calculated in Canada

The blended rate is the weighted average of the two balances: (existing balance × existing rate + new money × new rate) ÷ total balance. When the term is extended, the weighting uses the months each portion is outstanding over the new term, which is why the extend figure differs from the simple average.

Everything after that is a like-for-like comparison, and getting it like-for-like matters more than the rate arithmetic. All three options are priced on the same combined balance over the same amortization, using the semi-annual convention i = (1 + r ÷ 2)^(2 ÷ n) − 1 that applies to Canadian fixed mortgages. The penalty on the break option is treated as cash paid at closing rather than rolled into the loan, so it is counted once and every option starts from the same principal.

That last point is the one most comparisons get wrong. If the penalty is financed, the break option starts and ends the term owing more than the others, and comparing interest alone flatters it — a lower cost that comes from carrying more debt is not a saving. The balance still owing at the end of the term is shown for every option so you can see that nothing is being hidden in it.

• Blended rate = (balance × rate + new money × new rate) ÷ combined balance
• Extending reweights by the months each portion is outstanding over the new term
• All three options use the same combined balance and the same amortization
• The break penalty is paid as cash, counted once, and never financed into the loan
• Semi-annual compounding throughout: i = (1 + r ÷ 2)^(2 ÷ n) − 1

Why the penalty depends on who your lender is

The penalty to break a fixed mortgage is the greater of three months’ interest and the interest rate differential. The IRD is where lenders diverge sharply, and the difference is not small.

A monoline lender generally uses the standard method: your contract rate less today’s rate for a term closest to the time you have left, applied to the balance over the remaining months. A big bank typically uses the posted-rate method instead, comparing against its posted rate less the discount you originally negotiated. Where that original discount was generous, the comparison rate collapses and the penalty balloons — often to several times the monoline equivalent on identical numbers.

Both figures are shown so you can see the spread. The posted rate and original discount are inputs because they materially change the answer and only your mortgage documents have the real values. If you are with a big bank and you negotiated hard at signing, expect the penalty to be the deciding factor rather than a footnote.

• Penalty = the greater of three months’ interest and the IRD, for a fixed mortgage
• A variable mortgage is almost always three months’ interest, with no IRD at all
• Monoline standard method — contract rate less today’s comparable market rate
• Big-bank posted-rate method — posted rate less your original discount, which is usually worse for you
• A discharge fee applies on top, and provincial registration costs may too

Using your results well

Start with the numbers from your actual mortgage statement rather than estimates — the balance, the contract rate, and the exact months remaining. The penalty scales directly with the months left, so a rough guess there moves the answer more than anything else on the page.

Then ask your lender for their blend quote in writing and compare it against the blended rate shown here. Lenders are not obliged to offer you a clean weighted average, and the gap between the two is a negotiating position. If their quote is materially worse than the arithmetic, ask why.

One thing this deliberately does not model is what happens after the term ends. All three options leave you with a balance to renew at an unknown future rate, and the option that is cheapest over five years may not be cheapest over twenty-five. Where the gap between the top two options is small, treat it as a tie and decide on flexibility instead: which one leaves you free to move, to shop, or to pay it down.

• Use the exact balance, rate and months remaining from your mortgage statement
• Get the lender’s blend quote in writing and compare it against the arithmetic here
• Confirm whether you are being offered a blend to term or a blend and extend
• If porting, check the rules — most lenders allow 30 to 120 days between sale and purchase
• Where the gap is small, decide on flexibility rather than a few hundred dollars