Blended Interest Rate Calculator

This calculator enables you to determine the “blended interest rate” of all your mortgages.

We designed it mainly in response to the massive borrowing that has occurred over the last few years through home equity lines of credit.  These loans allow you to take equity from your home literally with the stroke of a pen, making them convenient, perhaps too convenient.

In theory, these loans are great.  You can borrow for short term needs and repay in accordance with a plan, such as repaying the loan with an expected bonus, a sale of stock, an inheritance, a tax refund, or developing a payment plan that will pay off the borrowings over a specified period of time.  However, in many cases, the borrower does not actually have a pay off plan. (see “Home Equity Line of Credit” in the Loan Programs section of our website). What makes this reality somewhat disconcerting is that these loans have variable interest rates; while these rates were at historic lows during the last few years, they were nearly double digit in 2000 (see “Wall Street Journal Prime Rate” in the Historical Mortgage Trends section of our website).

With this calculator, determining a blended interest rate is simple. First we’ll let you view “OUR EXAMPLE”, then we’ll have you calculate yours.

In our example, we will assume the following:

  Balance Interest
First Loan 200,000.00 6.000%
Second Loan 50,000.00 7.000%

"OUR EXAMPLE"




 

Loan
Balance

Current
Rate

Loan
Ratio

Rate
Factor

1st  
200,000.00
6.000%
80.00%
4.800%
2nd  
50,000.00
7.000%
20.00%
1.400%
           
Total  
250,000.00
Blended Interest Rate
6.200%
           

For more specific detail on how a blended interest rate is calculated, please refer to “What Is A Blended Interest Rate?” in the “Frequently Asked Questions” of our website….click here to view .

Now, let’s create “YOUR EXAMPLE”. Simply provide the current balances and interest rates for your first and second loans and if applicable we can even accommodate a third loan. Insert your figures in the green shaded boxes below under Loan Balance and Current Rate to determine your blended interest rate.  Click the [Calculate] button after you enter your balances and rates.  The results will appear in the gray shaded boxes.

"YOUR EXAMPLE"

   

Loan
Balance

Current
Rate

Loan
Ratio

Rate
Factor

1st  
2nd  
3rd  
           
Total   Blended Interest Rate
           
       
Below is your blended interest rate given a variety of interest rates ranging from 5.00% to 12.50% for your second loan.
If
2nd % is
  THEN
Blended is
  If
2nd % is
  THEN
Blended is
     
     
     
     
     
     
     
     

Once again, if you have a realistic pay off plan for your second loan, it is less urgent to compare your blended rate to the current market rate for a first loan.

However, if you don't have a plan, and you are unlikely to develop one, then comparing your blended rate to the current market rate can be rewarding for the following reasons:

  • If your blended rate is higher than the current market rate for a first mortgage, you could benefit by combining your loans into a single loan.

  • If rising rates on your second loan are causing more and more restless nights, you can reverse that trend by combining your loans into a single fixed rate loan.  Another option would be to convert your adjustable rate second loan to a fixed rate second loan.

  • By combining your loans into a single loan, you have the opportunity to secure a home equity line of credit to be used as an emergency fund.  You should exercise caution to prevent this choice from leading to another “high loan balance, no pay off plan” scenario.

TIP--- If you currently do not have a plan to pay off your existing home equity line of credit and would like to consider one, a good place to start would be to determine a monthly payment necessary to pay off the balance in a specific period of time, say 3, 4 or 5 years. You can calculate that payment by using the “Mortgage Calculator” in this section of our website. Or, you can give us a call. We would love to hear from you.