Blend and extend: lower your rate without the penalty
A blend-and-extend renews your mortgage early with the same lender: you skip the prepayment penalty, and your new rate blends your current rate for the time left with today's rate for the extra time. With 5.39% and 30 months left, extending to a new 5-year term at 4.58% blends to about 4.99%. FCAC says your lender must tell you how it calculates the new rate.
How the rate is set
The common method weights each rate by time: (your rate × months left + today's rate × extra months) ÷ months in the new term. Lenders can use other methods, including posted rates, which is why FCAC tells lenders to explain theirs. Treat our blend calculator as a check on a quote.
Blend vs break vs wait
For the example ($420,000, 30 months left, new 5-year term), over five years:
| Route | Rate | Cost |
|---|---|---|
| Stay until renewal | 5.39% | $97,081 |
| Break and refinance now | 4.58% | $96,233 |
| Blend and extend | 4.99% | $96,891 |
This uses a penalty based on the lender's current rate. At a big bank using the posted-rate method the penalty would be larger, which makes blending look better still.
When blending wins
- Your penalty is a big IRD (a large rate drop, lots of time left, or a big-bank posted-rate formula).
- You want to stay with your lender, or can't easily qualify elsewhere.
- You need a little extra money and a blend-and-increase is cheaper than a full refinance.
Breaking tends to win when your penalty is only three months' interest (variable mortgages, or little time left) and another lender offers a clearly lower rate.
What to ask your lender
- The blended rate, the new term, and how the rate was calculated.
- Any administration fee, and whether the prepayment privileges reset.
- The penalty in writing, so you can compare breaking on the home page calculator.
Frequently asked questions
Is there a penalty for blend and extend?
No prepayment penalty: FCAC describes it as early renewal. Some lenders charge an administration fee, and the rate may include a margin.
Can I take cash out with a blend and extend?
Many lenders offer a blend-and-increase: the existing balance gets the blended rate and the new money gets today's rate. You must qualify for the higher amount.
Primary sources
- Financial Consumer Agency of Canada — Breaking your mortgage contract (fees, cash-back clawback, blend-and-extend) (effective October 15, 2025). Checked .
- Financial Consumer Agency of Canada — Reduce mortgage prepayment penalties (3 months' interest or the IRD; posted-rate method; prepayment privileges; porting) (effective October 15, 2025). Checked .