What is a blend and extend in mortgage terms?

In mortgage terms, a blend and extend refers to a strategy that allows borrowers to secure lower market rates on their current mortgage without needing to put in extra funds or go through a complete refinancing process. This typically involves taking an existing mortgage, which may have a higher interest rate, and blending it with the current market rate to create a new loan with a more favorable interest rate and terms.

The idea is that by extending the term of the mortgage while blending the rates, the borrower can achieve significant savings on interest payments and potentially reduce their monthly payment obligation. This is particularly useful in a fluctuating interest rate environment, where market rates may be lower than the rate the borrower is currently paying.

Using this approach, borrowers can adjust their mortgage terms to better fit their current financial situation, securing a lower rate without the up-front costs associated with new financing or refinancing. This option is especially attractive for those who want to take advantage of lower rates while managing their cash flow efficiently.