Blend-Able Mortgages

Blend-Able Mortgages

Blend-able….what does that even mean? Not all mortgages are equal. Some have a multitude of features while others are laden with restrictions. The more features a mortgage has, the higher the rate (which intuitively makes sense).  When you’re shopping for a loan, you need to decide what’s important to you and understand the implications. This restriction comes up often, but is poorly advertised and highly misunderstood.

What is blend-able?

Basically, this feature allows you to add money to the mortgage without paying a penalty. For example, if you move to a new property and require a larger mortgage, your best option may to be blend in the additional money by way of a simple weighted average. This allows you to avoid paying the potentially large discharge penalty that you would otherwise have to pay with a non-blend-able product. Similarly, if you’re looking to refinance your mortgage to do renovations, consolidate debt, etc., a blend-able feature will serve you well.

Who should opt for a non blend-able mortgage?

Non blend-able mortgages are, in our opinion, only suitable for people who are certain they will not require any additional money on their mortgage at any point during the term.  Obviously, this is tough for anyone to commit to because individual circumstances are dynamic and can change for unexpected reasons. If you opt for a non blend-able mortgage and everything remains status quo, you’ll be rewarded with a marginally lower interest rate.

While the rate is slightly lower for this particular restriction, it’s imperative you understand the repercussions before proceeding. Basically, if you want to move, need more money, or do anything the disrupts the amount of the mortgage, the resulting penalty will far outweigh any up front interest savings.

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