Blended Rate

What is a Blended Rater?

A blended rate is an interest rate that combines the rate from an existing mortgage with the rate of a new mortgage when refinancing or increasing the loan amount.

Why Blended Rates Matter in Real Estate

In Canada, lenders use blended rates when a borrower wants to access more funds mid-term—typically through refinancing, porting, or adding to their mortgage. Rather than paying a prepayment penalty to break the mortgage, a blended rate allows borrowers to combine rates.

Blended rates are calculated using:

• The current interest rate on the existing mortgage
• The new rate being offered
• The proportion of each mortgage amount

• Avoid prepayment penalties
• Access equity for renovations or investments
• Maintain flexibility while locking in new funds

Example of a Blended Rate

A homeowner with a $300,000 mortgage at 2.8% blends in $100,000 at a new 5.2% rate, resulting in a combined rate of 3.5% without breaking their mortgage.

Key Takeaways

• Combines old and new mortgage rates.
  
• Used to avoid penalties during refinancing.
• Helpful for borrowing additional funds.
• Terms vary by lender.
• Should be compared with full cost analysis.

Related Terms

• Refinance
• Porting
• Mortgage Term
• Prepayment Penalty
• Interest Rate