Blended Mortgage Rate (Two Loans)
The weighted cost of debt for keep-first-add-second vs refinance: blended = (bal1 x rate1 + bal2 x rate2) / (bal1 + bal2). A $300K first at 4% plus a $100K second at 8% blends to 5.00% on $400K ($1,667/mo interest) -- so keeping the 4% first and adding the 8% second beats a cash-out refinance only if the new single rate is above 5%. Shrink the second to $40K and the blend is 4.47%, close to the first, because the weighting follows the balances. A snapshot that ignores differing terms and amortization; a variable-rate second (HELOC) drifts. A comparison aid, not a payment plan; the loan documents govern.
Formula and source
combined = balance_1 + balance_2; blended = (balance_1 x rate_1 + balance_2 x rate_2) / combined; monthly_interest = (balance_1 x rate_1 + balance_2 x rate_2) / 1200.
Blended mortgage rate (the balance-weighted average cost of debt across two loans), by name; the actual loan documents govern.
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