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Blend and Extend Check out All Your Options
Blend and Extend your mortgage when you are buying another home, before your present house is sold. You can also use this type of mortgage to secure cash for other projects. Do the homework and save. There are several different scenarios where you might want to consider a blend and extend mortgage. You might also just want to do a mortgage blend and not extend. 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 loan 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 homeowner's loan is portable, so you can take it with you on your new house.
The ProblemIf 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 due on old house).
- Adding your $30,000.00 cash for new house and porting your old $150,000.00 debt 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 DecisionsWhat is best for you, will depend on several factors. - What the interest rate is on your old loan.
- What interest rate you can get on a new mortgage.
- How long you have left on the term of your old loan.
- What your pay out penalty is on your old debt.
- 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!" Twenty-four months 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 loan 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 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, the equity, the cash and do a blend and extend of the $150,000.00 and the added $50,000.00 To calculate the effective interest rate and payments here is a great site with a Blend and Extend Calculator. You can also select either a Canadian or a U.S.A. mortgage.
- 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 
Situation #1- Existing loan of $150,000.00, 20 year amortization, 36 months left on 5 year term @ 4.5% interest.
- Blend an extra $50,000.00, 20 year amortization, 36 month term @ 6.5% interest.
- Payments should be approximately: $1314.00 per month at effective rate of 5.0%
Situation #2- Existing debt of $150,000.00, 20 year amortization, blend and extend to 60 month term.
- Blend and extend in the $50,000.00, 20 year amortization, 60 month @ 6.5% interest.
- Payments should be approximately: $1380.00 per month at an effective rate of 5.6%
Situation #3- Payout existing $150,000.00 plus payout penalty.
- Write up a whole new mortgage of $200,000.00, 20 year amortization, 60 month term @ 6.5% interest rate.
- Payments should be approximately: $1481.00 per month at the 6.5% rate.
All the figures above assume monthly payments. Whether you are taking out a new mortgage, doing a blend and extend or renewing, it is always a good idea to look at all your options. Should you go to 26 payments a year? (Bi-Weekly) 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 debt. 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 homeowner's loan. To find out which way to go, you should talk to your bank 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 blend and extend 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 can explain all the pros and cons for your personal needs including a blend and extend. I don't want to sound like a broken record, but I'm just trying to get a point across. :-)
For More Information about Mortgages Mortgage Assumptions Portable Mortgages Seller Financed Mortgages Bridge Loans About Mortgage Brokers Qualifying Buyers From Blend and Extend - Back to Mortgage Help - Main Page
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