# Is Blend and Extend Mortgage worth it? Plus more questions :D



## jmbagsy (Mar 14, 2017)

Hi everyone, please help me figure out what to do with my current mortgage situation...

I am currently in a 5 year fixed mortgage at 2.74% interest rate (Scotiabank)
Principal balance is 332,543
Renewal date is on Aug 28, 2024

*1.* I've seen some crazy low mortgage interest rates as of today and read somewhere that a* Blend and Extend Mortgage* could help lower down my interest rate without paying any penalty.

*2.* Also, I've been wondering if breaking my current mortgage to go into a new one would be worth it as well. Saw some crazy low interest rates e.g. HSBC (Special offer rate of *0.99%* APR***on a 5-year *variable *closed term high ratio mortgage)

*3. *Lastly, what should I do first? Who should I start to talk to to begin with? (Mortage broker, Scotiabank, HSBC?)


If someone could help me how to do the right calculations to crunch some numbers, that would be highly appreciated as well. Cheers everyone!


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## Money172375 (Jun 29, 2018)

jmbagsy said:


> Hi everyone, please help me figure out what to do with my current mortgage situation...
> 
> I am currently in a 5 year fixed mortgage at 2.74% interest rate (Scotiabank)
> Principal balance is 332,543
> ...


I would start by asking what the penalty is to discharge and what the penalty is to early-renew.


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## jmbagsy (Mar 14, 2017)

Money172375 said:


> I would start by asking what the penalty is to discharge and what the penalty is to early-renew.


 Thank you kindly sir, I will do that when I talk to them.


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## balexis (Apr 4, 2009)

Have a look at the Martin's Mortgage Manoeuver:









Martin's Mortgage Maneuver


How to Avoid Huge Mortgage Break Fees and Take Advantage of Today's Low Rates




martinsmoneymusings.substack.com









Martin's Mortgage Maneuver: Part Two


Refinancing your mortgage to create low-risk, passive income




martinsmoneymusings.substack.com









Martin's Mortgage Maneuver: Frequently Asked Questions


Not quite getting how the MMM works? Here are some answers




martinsmoneymusings.substack.com





In a nutshell, the author proposes to blend-and-extend your mortgage, and once its done your IRD base rate is reset and you can break the mortgage with a very low penalty. YMMV, do your own research, etc etc.


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## jmbagsy (Mar 14, 2017)

balexis said:


> Have a look at the Martin's Mortgage Manoeuver:
> 
> 
> 
> ...


 will read it. Thanks for sharing the source.


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## Mortgage u/w (Feb 6, 2014)

Don't get fooled by the lowest advertised rate. We're no longer in an era of a "one-rate-fits-all".

Just like you mentioned, HSBC offers 0.99% for a _high-ratio_ mortgage. That means the loan is default insured - you can't insure refinances so clearly, 0.99% does not apply to you.

You will need to talk to your bank first. Every lender has different options when it comes to breaking your mortgage contract. The blends work best when you want to increase your loan amount. 
Remember, just because you avoid a penalty, doesn't mean that one isn't triggered. It all comes down to how your lender blends that penalty into your new mortgage amount, rate and term.


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## jmbagsy (Mar 14, 2017)

UPDATE: So i followed @balexis  suggestion about doing Martin's Maneuver and here is where I am at. (I think this is gonna work)

I talked to my current lender (Scotiabank) about doing a Blend and Extend Mortgage and it was done. They brought down my rate from 2.74 to 2.49.
Before doing it, I asked how much I will be paying to break the mortgage and of course, it was a staggering 17k CAD. And now after doing the Blend and Extend, I called Scotia and asked how much now I will be paying to break it, and they quoted me an estimate of around $2,000+.

I am now currently shopping around with the best rates I could get, I am looking at getting a variable rate (Have seen the lowest 1.24% with HSBC for switching mortgage)

My follow up question is how do i do the switch properly and what should I look out for? Thanks!


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## Money172375 (Jun 29, 2018)

jmbagsy said:


> UPDATE: So i followed @Money172375 suggestion about doing Martin's Maneuver and here is where I am at. (I think this is gonna work)
> 
> I talked to my current lender (Scotiabank) about doing a Blend and Extend Mortgage and it was done. They brought down my rate from 2.74 to 2.49.
> Before doing it, I asked how much I will be paying to break the mortgage and of course, it was a staggering 17k CAD. And now after doing the Blend and Extend, I called Scotia and asked how much now I will be paying to break it, and they quoted me an estimate of around $2,000+.
> ...


I believe @balexis gets credit for the reco.


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## jmbagsy (Mar 14, 2017)

Money172375 said:


> I believe @balexis gets credit for the reco.


Edited it, thanks for pointing it out.


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## Mortgage u/w (Feb 6, 2014)

jmbagsy said:


> UPDATE: So i followed @balexis  suggestion about doing Martin's Maneuver and here is where I am at. (I think this is gonna work)
> 
> I talked to my current lender (Scotiabank) about doing a Blend and Extend Mortgage and it was done. They brought down my rate from 2.74 to 2.49.
> Before doing it, I asked how much I will be paying to break the mortgage and of course, it was a staggering 17k CAD. And now after doing the Blend and Extend, I called Scotia and asked how much now I will be paying to break it, and they quoted me an estimate of around $2,000+.
> ...


First you need to see if you can Switch the loan without incurring solicitor fees. If Scotia registered a collateral charge, Switches are not possible - at least not free. The most you would incur is a solicitor fee to discharge and register a new lien. Personally, I recommend against switches - the new lender never discharges the old lien so the day you sell, you need to pay for all the extra discharges depending how many times you switched lenders.

Other than that, you're free to bring your mortgage just about anywhere since you're paying a penalty. Just make sure your new mortgage is not restricted by anything - don't get fooled by low rates alone. A variable rate today hovers at prime (currently 2.45%) minus 1.00%. Anything lower than that is very possible.....just ensure you read the fine print.


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## jmbagsy (Mar 14, 2017)

So just an UPDATE since i posted this.

The Mortgage Maneuver was a SUCCESS! Thank you again @balexis for sharing it to me and others who answered my queries and offered advices and suggestions.

So from 2.74 5 year fixed from Scotiabank, I broke it after the blend and extend, and went to Merix (as suggested by my Mortgage broker) with 1.45 variable rate (Prime - 1%) for 5 years.

I never paid any closing costs by refinancing, the total prepayment penalty charges was $2030 which was added to the mortgage under the new lender.

I used online calculator to see how much I saved...

Scenario 1 (Before the Maneuver at 2.74%)












Scenario 2 (After the Maneuver at 1.45%)











With these numbers, how do I calculate exactly how much I saved by refinancing my mortgage?


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## bgc_fan (Apr 5, 2009)

jmbagsy said:


> With these numbers, how do I calculate exactly how much I saved by refinancing my mortgage?


I would say the difference between the interest paid: $40,755-$21,395 = $19,360. You could use the total paid, but it's not really going to match because you end up paying down more of the principal.


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## birdman (Feb 12, 2013)

This entire process cause me some confusion as you are comparing apples to oranges in that you are comparing savings on different products with one being a variable rate and one being a fixed rate. Personally, I expect rates to go up as opposed to down but the extent of any increase, if any, is unknown. Many people have not experienced an increasing rate environment.


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## Mortgage u/w (Feb 6, 2014)

jmbagsy said:


> ....With these numbers, how do I calculate exactly how much I saved by refinancing my mortgage?


The true savings is in the interest you will save for the next 3 years, (which is what you had left on your original mortgage with old rate). Subtract the penalty and any legal fees you paid to switch over and that will be your savings. 



birdman said:


> This entire process cause me some confusion as you are comparing apples to oranges in that you are comparing savings on different products with one being a variable rate and one being a fixed rate. Personally, I expect rates to go up as opposed to down but the extent of any increase, if any, is unknown. Many people have not experienced an increasing rate environment.


True, the variable rate can go up.....but it can also go down. And if it does go up within the next 3 years, it will not be significant enough to offset the savings.

Good job on reducing your penalty and securing a low variable rate!


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## CoralWurth (May 4, 2021)

When you have other high-interest debts to deal with (maybe). One situation where you might want to consider extending your mortgage term is when your home loan is not the only debt you are juggling. For example, you may have one or more high-interest loans which you are also paying on.


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