Basically, if you are in a fixed mortgage, you can take any mortgage deal your bank is currently offering that is longer than the term you have left. Your interest rate becomes an average of the mortgage you are in, and the one you took on (based on the period you have left).
For myself, I had about 3.5 years left at a 3.69% interest rate. My bank (Scotiabank) was offering 4 year mortgages at 2.99%. I signed on for a "blend-and-extend", which extended my mortgage to 4 years, and made my average interest rate 3.58%. I save close to $20 a month in interest, which I use towards additional payments on the principle.
This transaction is free at most, if not all banks. It allows people to take advantage of historically low interest rates. I don't expect 2.99% mortgages to be available in 2-3 years, so if your mortgage will be up by then, it is probably worth thinking about.
If you are planning on selling your house in the near future, or simply want to get on a variable interest mortgage, then this wouldn't be for you. Myself, I don't plan on selling, and like the stability of fixed, so I will probably be doing this every 6 months, as long as the interest rates are at these historic lows.
Edited by D-Money, 27 March 2012 - 01:24 PM.