What Is a Blended Interest Rate?
A blended interest rate is the weighted average interest rate across two or more loans. It is calculated by multiplying each loan's balance by its interest rate, summing all results, then dividing by the total combined balance. The blended rate shows you the effective overall cost of your combined debt.
Blended Rate Formula
Blended Rate = (Balance1 × Rate1 + Balance2 × Rate2 + ...) ÷ Total Balance
Example: $200,000 at 3.5% + $75,000 at 8.5% = ($7,000 + $6,375) ÷ $275,000 = $13,375 ÷ $275,000 = 4.86%
Step-by-Step Blended Rate Examples
Example 1: 2021 Mortgage + 2024 HELOCFirst mortgage: $300,000 at 2.875% (originated 2021). Home equity loan: $75,000 at 8.5% (2024 rate). Blended rate = (300,000×0.02875 + 75,000×0.085) / 375,000 = (8,625 + 6,375) / 375,000 = 4.00%. Compare to full refinance at 7.0% — the blended approach at 4.00% saves approximately $1,100/month on a $375,000 balance.
Example 2: Student Loan Consolidation DecisionFederal loan: $20,000 at 4.5%. Private loan: $10,000 at 7.5%. Blended rate = (20,000×0.045 + 10,000×0.075) / 30,000 = (900 + 750) / 30,000 = 5.50%. If consolidation offers 6.0%, it is WORSE than the 5.50% blended rate — do not consolidate.
When Does a Blended Rate Mortgage Make Sense?
| Existing Mortgage Rate | New HELOC Rate | Blended Rate | vs 7% Full Refi |
|---|---|---|---|
| $300K at 2.875% | $60K at 9.0% | 3.98% | Much better — keep blended |
| $250K at 3.0% | $80K at 8.5% | 4.36% | Better — keep blended |
| $200K at 4.5% | $80K at 9.0% | 5.71% | Close — evaluate carefully |
| $150K at 5.5% | $100K at 9.0% | 6.81% | Near refi rate — consider refinancing |
How do I calculate the blended rate of two loans?
Multiply each loan's balance by its rate, add the results, then divide by total balance. Example: $200,000 at 3.5% + $50,000 at 8.0% → (200,000×0.035)+(50,000×0.080) = 7,000+4,000=11,000 ÷ 250,000 = 4.40% blended rate.
When is a blended mortgage better than refinancing?
A blended mortgage is better when your existing rate is significantly below current rates. With mortgages originated in 2020–2022 at 2.75%–4%, adding an 8–9% HELOC still typically produces a blended rate of 3.5%–5.5% — well below a full refinance at 7%+.