Blended Mortgage Rate (Two Loans)
The weighted cost of debt for keep-first-add-second vs refinance.
Example
You enter
- First loan balance ($) 300000
- First loan rate (%) 4
- Second loan balance ($, HELOC / seller 2nd) 100000
- Second loan rate (%) 8
You get
- Blended rate 5
- Combined balance $400000
- Total monthly interest $1667/mo
Checked against published worked examples from: Corporate Finance Institute.
Details, formula, and sources
Scopeblended = (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 or tablecombined = 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.
Source and editionBlended mortgage rate (the balance-weighted average cost of debt across two loans), by name; the actual loan documents govern.
Free accessThe balance-weighted average rate is a standard weighted-average-cost-of-debt calculation; the balances and rates come from the loan statements.
What governsEstimate. AHJ and licensed professional govern.
API field namesbalance_1, rate_1, balance_2, rate_2, blended_rate, combined, monthly_interest
- Balance-weighted the blend follows the balances, so a small second hardly dilutes a big low-rate firstweighted-average cost of debt
- Snapshot ignores differing terms and amortization; a variable second drifts as its rate resetsscope of this tile
- Comparison basis keep-and-add beats a refinance only if the single new rate exceeds the blended ratecost-of-debt comparison