Blended Rate Calculator
Calculate the blended interest rate of two loans with different amounts and rates. Enter each loan's balance and rate to find the weighted average rate you effectively pay.
Combined Loan Blended Rate Calculator
Blended Interest Rate Formula
Where:
- \(L_1\) — amount of the first loan
- \(r_1\) — interest rate of the first loan (%)
- \(L_2\) — amount of the second loan
- \(r_2\) — interest rate of the second loan (%)
The formula is a weighted average: each loan's rate contributes in proportion to its share of the total debt, so the result always falls between the two individual rates.
Blended Rate – Calculation Example
Example: you have a first loan of $100,000 at 4% interest and a second loan of $50,000 at 6% interest, and you want the combined rate on the total $150,000 of debt.
\[ \text{Blended Rate} = \frac{100{,}000 \times 4 + 50{,}000 \times 6}{100{,}000 + 50{,}000} = \frac{400{,}000 + 300{,}000}{150{,}000} \]
\[ \text{Blended Rate} = \frac{700{,}000}{150{,}000} \approx 4.67\% \]
Result: the blended interest rate is approximately 4.67% on the combined $150,000 debt.
How to Use the Blended Rate Calculator
- Enter the First loan amount in dollars (for example, an existing mortgage balance).
- Enter the First loan interest rate as a percentage, e.g. 4 for 4%.
- Enter the Second loan amount in dollars (for example, a second mortgage or home equity loan).
- Enter the Second loan interest rate as a percentage, e.g. 6 for 6%.
- Read the Blended Interest Rate, shown as a percentage rounded to two decimal places.
What Is a Blended Rate?
A blended rate is the single, weighted-average interest rate that applies when two loans with different rates are combined into one total debt. Instead of thinking of your debt as "part at 4% and part at 6%," the blended rate tells you what you effectively pay on every dollar borrowed. It is the standard way lenders and borrowers describe the overall cost of overlapping loans.
The rate is weighted by loan size, not a simple average. In the example above, simply averaging 4% and 6% would give 5%, but because the 4% loan is twice as large, it pulls the true blended rate down to 4.67%. This is why a blended rate always lies between the two individual rates, closer to the rate of the larger loan.
Blended rates matter in several real situations. When you refinance a first mortgage while keeping a second mortgage or home equity line of credit, lenders often quote the new loan based on a blended rate of both debts. Buyers using a piggyback second loan to avoid private mortgage insurance, or investors combining a primary mortgage with a secondary loan, also use blended rates to compare options. If you are weighing a mortgage refinancing decision, the blended rate tells you whether consolidation actually lowers your overall cost.
Interpreting the Result
The blended rate answers the question: "What single rate would produce the same total annual interest on the combined balance?" If it is lower than the rate a lender offers on a new consolidated loan, refinancing into one loan would cost you more in interest; if the new rate is below the blended rate, consolidation would save money.
You can verify the result by computing total annual interest: multiply each balance by its rate, add them together, and divide by the combined balance. In the example, \(100{,}000 \times 0.04 + 50{,}000 \times 0.06 = 7{,}000\) dollars of annual interest on \(150{,}000\) dollars of debt, which is exactly \(4.67\%\).
Assumptions, Limitations and Tips
- Simple weighting only. The calculator weights rates by principal balance. It does not account for amortization schedules, differing loan terms, or how rates may change over time on adjustable-rate loans.
- Two loans maximum. For more than two loans, blend two at a time: calculate the blended rate of the first pair, treat the result as one "loan" with the combined balance, then blend it with the next loan.
- Use current balances. Enter the remaining principal on each loan, not the original amounts, especially for older loans that have been partially paid down.
- Rate vs. APR. The blended rate uses nominal interest rates. Fees, closing costs, and points are not included; for those, compare the Mortgage APR of a new consolidated loan instead.
- Refinancing check. Before consolidating, estimate what a single new loan would cost with the Loan Calculator or the Mortgage Calculator, and compare that rate to your blended rate.
Quick Reference: Effect of Loan Size on the Blended Rate
| Loan 1 ($100,000 @ 4%) | Loan 2 (@ 6%) | Blended Rate |
|---|---|---|
| $100,000 | $0 | 4.00% |
| $100,000 | $50,000 | 4.67% |
| $100,000 | $100,000 | 5.00% |
| $100,000 | $200,000 | 5.33% |
As the table shows, the higher-rate loan drags the blended rate upward in proportion to its share of total debt. The larger the balance at the higher rate, the closer the blended rate moves toward it.
Frequently Asked Questions
Can I calculate a blended rate by hand without a calculator?
Yes. Multiply each loan balance by its interest rate, add the two products, and divide by the combined balance. For example, with $80,000 at 5% and $20,000 at 7%: \\(80{,}000 \times 5 + 20{,}000 \times 7 = 540{,}000\), and \\(540{,}000 \div 100{,}000 = 5.4\)% blended rate. A shortcut: the blended rate equals the low rate plus the high-rate loan's share of total debt times the difference between the two rates.
Why is my blended rate not just the average of the two rates?
Because the rates are weighted by balance. A simple average \\((r_1 + r_2)/2\) is only correct when both loans are the same size. If the loan with the higher rate is much larger, the blended rate sits close to that higher rate; if it is small, it barely moves the result. Using a simple average is the single most common mistake and can mislead a refinancing decision by half a percent or more.
What is a good blended rate when refinancing?
A good blended rate is simply one below the rate a lender offers on a new consolidated loan. There is no universal target: what counts is the comparison. For context, in recent years US 30-year mortgage rates have ranged from under 3% to around 7%, so a blended rate in the 4–6% range is common for combined first and second mortgages. Compare against actual quotes, not rules of thumb.
Does the blended rate change as I pay down the loans?
Yes, if you pay the two loans down at different speeds. Each month the balances shift, so the weights in the weighted average shift too. If you send extra payments to the higher-rate loan, the blended rate gradually falls toward the lower rate. To see the effect, rerun the calculation with projected future balances instead of today's balances.
Can I use this calculator with currencies other than dollars?
Yes. The currency unit does not matter because it cancels out in the formula — the result is a percentage. You can enter amounts in euros, pounds, or any other currency, as long as both loans use the same currency. The dollar sign is only a display convention; the math is unit-independent.
How do I blend three or more loans?
Blend them in pairs. First calculate the blended rate of two loans, then treat that result as a single loan with the combined balance, and blend it with the third loan. Repeat for any additional loans. This works because the weighted average is associative — the final result is identical to weighting all loans at once: \\(rac{ ext{sum of (balance } imes ext{ rate)}}{ ext{sum of balances}}\).
Does the blended rate include fees, points, or closing costs?
No. The blended rate is based on nominal interest rates only. It ignores loan origination fees, points, closing costs, and mortgage insurance, all of which affect the true cost of borrowing. When comparing a consolidation offer, ask the lender for the APR of the new loan, which bundles most fees into a single annualized figure, and compare that against your blended rate rather than the headline rate.
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