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Blend and Extend Check out All Your OptionsThere are several different scenarios where you might want to consider a blend and extend mortgage. You might also just want to do a blended mortgage and keep the terms the same. Because the main theme of this website is "how to sell for sale by owner", lets look at the most common problem and how to fix it with a blend and extend mortgage. 
* You have just sold your house for sale by owner for $275,000.00. Congratulations! Your total costs to sell was $5000.00 including promotion, legal, closing costs etc.* You are now able to purchase your dream home for $350,000.00. * Your existing mortgage on your old house is $150,000.00 with 3 years left on a 5 year term @ 4.5% interest rate and amortized over 20 years. * You have an additional $30,000.00 cash towards the purchase of your new home. * Your old mortgage is portable, so you can take it with you on your new house. The Problem If you look at all the figures above, you will calculate that you are $50,000.00 short by using: * The equity from the sale = $120,000.00 ($275,000.00 - $5,000 for selling the house - $150,000.00 mortgage due on old house). * Adding your $30,000.00 cash for new house and porting your old $150,000.00 mortgage to your new home. * $120,000.00 equity + $30,000 cash + $150,000.00 mortgage = $300,000.00. Yep, still $50,000.00 short! Decisions Decisions What is best for you, will depend on several factors. * What the interest rate is on your old mortgage. * What interest rate you can get on a new mortgage. * How long you have left on the term of your old mortgage. * What your pay out penalty is on your old mortgage. * What your future plans are. Well not so much. If you are anything like my wife and I and also many other people, those kind of change from day to day! Nothing is ever written in stone. Side Note If I may be so bold. My experience and advice to people is; Don't always make plans based on what you think will happen tomorrow. When I was active in the real estate industry, I can't even count the times people have said; "Yes sir, this is our last home we will be buying." "We are staying here until they carry us out in a pine box!" Two years later I'd get the call. "Hi Doug, We would like to sell our house and move to...... (Somewhere)." P.S. My wife and I bought and sold several houses before we learned this lesson as well! :-) Some Options Here are a few options you might consider based on the information above: * Pay off the old mortgage and pay out penalty, put your cash and equity into the new house and take out a new mortgage of $200,000.00 * Take your $150,000.00 mortgage and port it to the new house plus your $120,000.00 equity and $30,000.00 cash and take out a 2nd mortgage for $50,000.00. * Take the $150,000.00 mortgage, the equity, the cash and do a blend and extend mortgage of the $150,000.00 and the added $50,000.00 * Take the $150,000.00 the cash, the equity to the new house and take out a line of credit for the $50,000.00 * Take the $150,000.00, the cash, the equity to the new house and then borrow the extra $50,000.00 on a shorter term loan. Let's Look at the Blend and Extend Mortgage 
* Existing mortgage of $150,000.00, 20 year amortization, 3 years left on 5 year term @ 4.5% interest. * Blend an extra $50,000.00, 20 year amortization, 3 year term @ 6.5% interest. * Payments should be approximately: $1314.00 per month at effective rate of 5.0% * Existing mortgage of $150,000.00, 20 year amortization, blend and extend to 5 year term. * Blend in the $50,000.00, 20 year amortization, 5 year term @ 6.5% interest. * Payments should be approximately: $1380.00 per month at an effective rate of 5.6% * Payout existing $150,000.00 mortgage plus payout penalty. * Write up a whole new mortgage of $200,000.00, 20 year amortization, 5 year term @ 6.5% interest rate. * Payments should be approximately: $1481.00 per month at the 6.5% rate. All the figures above assume 12 monthly payments a year. Whether you are taking out a new mortgage, doing a blend and extend or renewing a mortgage, it is always a good idea to look at all your options. Should you go to 26 payments a year? If you are comfortable with the payments, the answer is simple. YES. Do the math. It will save you a great deal of interest and knock the amount of years you will have to pay off the mortgage. Not Selling? If you landed on this page and you are not selling, but perhaps are wanting to do some major renovations, buy a cottage, or have some other use for some extra cash, you may want to consider a blend and extend of your present mortgage. To find out which way to go, you should talk to your mortgage lender or, a mortgage broker for advice. It's your money and you deserve to save as much as possible. It is worth your effort to check all available options including a blended mortgage, depending on what your circumstances are. This is why I love the mortgage broker option. They work to get you the best possible interest rate and terms. They generally costs you nothing. They have always personally saved us both money and time. I don't want to sound like a broken record, but I'm just trying to get a point across. :-) Return to - Sell My House - Home Page
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