Blended Rate Mortgage Calculator

What is a Blended Rate Mortgage Calculator?

A Blended Rate Mortgage Calculator is a financial tool that helps borrowers estimate the combined interest rate when merging two or more loans with different interest rates. This calculation is particularly useful when refinancing a mortgage or combining multiple loans into a single loan.

Formula for Blended Rate Calculation

The formula for calculating the blended rate is:

\[BR = \frac{L_1 \times R_1 + L_2 \times R_2}{L_1 + L_2}\]

Where:

• BR = Blended Rate
• L₁ = Loan 1 Amount
• R₁ = Interest Rate for Loan 1
• L₂ = Loan 2 Amount
• R₂ = Interest Rate for Loan 2

Calculation Steps

1. Multiply each loan amount by its respective interest rate.
2. Sum the results from step 1.
3. Add all loan amounts together.
4. Divide the sum from step 2 by the total loan amount from step 3.
5. The result is the blended interest rate.

Example

Let's consider a scenario with the following details:

• Loan 1: $200,000 at 3.5% interest
• Loan 2: $100,000 at 4.5% interest

Calculation:

1. $200,000 × 3.5% = $7,000
2. $100,000 × 4.5% = $4,500
3. $7,000 + $4,500 = $11,500
4. $200,000 + $100,000 = $300,000
5. $11,500 ÷ $300,000 = 0.0383 or 3.83%

In this example, the blended rate for the combined loans is 3.83%. This rate represents the weighted average interest rate of the two loans, taking into account their respective amounts and individual interest rates.