What Is a Blended Mortgage Rate? How to Calculate Your Combined Rate on Two Loans

Many Washington homeowners are carrying two mortgages right now — a first mortgage, often at a rate from years past, plus a home equity line of credit (HELOC) or second mortgage taken out more recently at a higher rate. If that’s your situation, do you know what you’re actually paying across both loans combined?

That’s where the blended rate comes in.

What Is a Blended Mortgage Rate?

A blended rate — sometimes called an effective rate — is the single interest rate that represents your combined cost across two mortgages. It accounts for both the balance and the rate on each loan, weighted proportionally. The result tells you what you’re really paying to carry your total mortgage debt.

This number matters most when you’re deciding whether to refinance. If you have a low-rate first mortgage and a high-rate HELOC, you might assume you’re better off leaving the first alone. But depending on the balances and rates involved, your blended rate could be higher than you’d expect — and a single refinance into today’s rates might actually save you money.

How to Calculate Your Blended Rate

The math is straightforward. Here’s the step-by-step:

1. Multiply each mortgage balance by its interest rate to get the annual interest expense for that loan.
2. Add the two interest expense amounts together.
3. Add the two balances together to get your total mortgage debt.
4. Divide the total interest expense by the total balance. That’s your blended rate.

Example

Say you have a first mortgage with a balance of $400,000 at 3.25%, and a HELOC with a balance of $80,000 at 8.75%.

• First mortgage: $400,000 × 3.25% = $13,000 in annual interest
• HELOC: $80,000 × 8.75% = $7,000 in annual interest
• Total interest: $13,000 + $7,000 = $20,000
• Total balance: $400,000 + $80,000 = $480,000
• Blended rate: $20,000 ÷ $480,000 = 4.17%

Even though the HELOC rate is 8.75%, the blended rate is only 4.17% — because the first mortgage balance is so much larger and its rate is so low. In this case, refinancing into a single loan at today’s rates would likely cost more, not less.

A Different Scenario

Now say the first mortgage balance is $250,000 at 3.5% and the HELOC balance is $150,000 at 9.0%.

• First mortgage: $250,000 × 3.5% = $8,750
• HELOC: $150,000 × 9.0% = $13,500
• Total interest: $8,750 + $13,500 = $22,250
• Total balance: $250,000 + $150,000 = $400,000
• Blended rate: $22,250 ÷ $400,000 = 5.56%

Here, the HELOC is large enough relative to the first mortgage that the blended rate climbs significantly. Depending on where rates are when you’re reading this, a cash-out refinance or consolidation loan might be worth a closer look.

When the Blended Rate Calculation Really Matters

Running this calculation is most useful in a few common situations:

You’re considering a cash-out refinance to pay off your HELOC. Before deciding, compare your blended rate to what a new single loan would cost. If the blended rate is lower, the refinance probably doesn’t pencil out on rate alone — though there may be other reasons to consolidate, like eliminating a variable rate or simplifying your payments.

Your HELOC rate has climbed. HELOCs are typically variable-rate products tied to the prime rate. If the prime rate has risen since you opened the line, your blended rate is higher than it was — and the math may have shifted in favor of refinancing.

You’re thinking about paying down the HELOC faster. Extra payments toward the higher-rate balance will lower your blended rate over time and reduce your total interest cost. The blended rate calculation helps you see exactly how much progress you’re making.

You’re evaluating a new purchase with an 80/10/10 or similar structure. Piggyback loan strategies — where you take a first and second mortgage simultaneously — can help avoid mortgage insurance. Calculating the blended rate upfront tells you whether the combined cost beats a single loan with PMI.

A Shortcut for Proportional Blending

If you know the loan-to-value ratios (rather than exact balances), you can use a faster approach. Multiply each rate by its share of the total financing, then add the results.

For example, an 80/20 structure with a 7.0% first and an 9.5% second:

• 7.0% × 0.80 = 5.60
• 9.5% × 0.20 = 1.90
• Blended rate: 5.60 + 1.90 = 7.50%

This works cleanly when the proportions are simple — useful for evaluating purchase scenarios before you have exact dollar figures.

What the Blended Rate Doesn’t Tell You

The blended rate is a useful starting point, but it’s not the whole picture. A few things it doesn’t capture:

Variable rate risk. If your HELOC rate is variable, your blended rate will change as rates move. What looks manageable today could shift meaningfully if the prime rate rises further.

Loan terms. A first mortgage with 22 years remaining and a HELOC due in 3 years are structurally very different — even if the blended rate looks reasonable.

Refinance costs. If you consolidate into a single loan, you’ll have closing costs to factor in. A lower blended rate doesn’t automatically make a refinance worthwhile — you’ll want to calculate your break-even point too.

Tax considerations. Mortgage interest deductibility depends on how loan proceeds were used and your overall tax situation. If there’s any question, check with your CPA before making a decision based on rate alone.

Not Sure What Makes Sense for Your Situation?

If you’re carrying two mortgages and wondering whether to consolidate, pay down the HELOC, or leave things as they are, I’m happy to run the numbers with you. A few minutes of math can make the right path a lot clearer.

Let’s Talk →