Blended Interest Rate Calculator (Weighted Average APR)
Calculate the combined weighted-average blended interest rate across multiple mortgages, business loans, or student loans.
How to Use the Blended Interest Rate Calculator (Weighted Average APR)
A blended interest rate represents the true weighted-average interest rate across two or more loans with different principal balances and APRs. Rather than taking a simple arithmetic average of the interest rates, the blended rate weights each loan’s interest rate in proportion to its dollar balance—revealing the exact effective rate you are paying on your total debt.
Formula and Calculation Methodology
- B_i: Principal balance of individual loan i
- R_i: Annual interest rate (%) of individual loan i
- R_blended: Weighted average interest rate across the combined debt portfolio
Homeowners frequently use blended rate calculations when deciding between a cash-out refinance (which replaces a low-rate first mortgage with a brand-new loan at current market rates) versus keeping their existing first mortgage intact and taking out a smaller Home Equity Line of Credit (HELOC) or home equity loan. If the blended rate of your first mortgage plus a HELOC is lower than today’s cash-out refinance rate, keeping the two separate loans saves money.
Sample Blended Rate Scenarios (First Mortgage + HELOC / 2nd Lien)
| 1st Mortgage ($300k) | 2nd Lien / HELOC ($50k) | Total Debt | Effective Blended Rate |
|---|---|---|---|
| 3.25% APR | 8.00% APR | $350,000 | 3.929% |
| 4.00% APR | 8.50% APR | $350,000 | 4.643% |
| 5.00% APR | 9.00% APR | $350,000 | 5.571% |
| 6.00% APR | 9.50% APR | $350,000 | 6.500% |
Frequently Asked Questions
How is a blended interest rate different from a simple average?
A simple average treats a $300,000 mortgage at 3.5% and a $20,000 loan at 9.5% equally (6.5%), whereas a blended rate weights each rate by its balance, yielding the true effective rate of 3.875%.
How does federal student loan consolidation round the blended rate?
When consolidating federal Direct Loans, the Department of Education calculates your weighted average interest rate and rounds it up to the nearest one-eighth of one percent (0.125%).
When should I refinance instead of keeping a blended two-loan structure?
Refinancing into a single loan makes sense when the new standalone refinance rate is lower than your current weighted-average blended rate, after accounting for closing costs.