Why blended payment matters to a first-time founder
Each blended payment reduces the amount borrowed and pays the interest due for that period. On many mortgages the total you pay each month stays steady, while the interest portion shrinks and the principal portion grows. Budget for the full payment. The first month’s interest is not the ongoing cost, and it is not the pace at which the balance falls.
Examples of blended payment
A buyer in Calgary borrows CAD 400,000 on a mortgage with a blended payment of CAD 2,300 a month. In an early month about CAD 1,700 is interest and CAD 600 reduces the principal. Years later the same CAD 2,300 is mostly principal. The household plans around CAD 2,300 and asks the lender for the schedule that shows the split.
Common misunderstanding
A blended payment mixes principal and interest in the same instalment. It is not an interest-only payment, and it is not a blended rate. A blended rate mixes an old interest rate with a new one. The payment total is often fixed for a period. The split inside it changes as the balance falls.
When to use it
Use the term when you compare an instalment mortgage or other loan with an interest-only loan, or when you want to know how fast the balance will fall. Ask for the amortisation schedule before you sign. If the contract says interest only for now, do not describe the payment as blended.