What is a Blended Rate?

A Blended Rates Calculator is a financial tool used to determine the weighted average interest rate when combining multiple loans or mortgage rates. This type of calculator is particularly useful for homeowners considering refinancing, businesses consolidating debts, or investors managing multiple credit sources. By inputting the principal amounts and interest rates of different loans, the calculator provides a single, averaged rate that reflects the overall cost of borrowing. This helps borrowers compare their current financing structure against new offers, aiding in more informed financial decisions.

In the mortgage industry, a blended rate is often used when a borrower wants to refinance before their current term ends but chooses to blend their existing mortgage rate with the new one instead of paying a penalty for breaking the contract. Lenders use a formula that takes into account the remaining balance, term, and interest rate of the existing loan alongside the new loan’s terms. A Blended Rates Calculator simplifies this process by automating the calculation, allowing users to see potential savings or costs instantly. It is a valuable tool for financial planning, ensuring that borrowers can optimize their debt structure for long-term savings.