You will hear the term blended rate when you are talking about two loans taken at the same time. It is a way to keep from shocking you with the rate on the second.
Example:
First mortgage of 50% LTV with a rate of 5%.
Second mortgage of 50% LTV with a rate of 10%.
You would have a blended rate of 7.5%. It is the average rate that you will be paying.
When I was doing loans one loan that I saw a lot of was an 80/20 loan. The first was and 80% LTV loan with a rate of 8.5%. The second loan at 20% LTV had a rate of 12.5%.
On a loan for 100K the first would have interest of $566/month. The second would have interest of $208/month. Total interst of 774/month. To get the same interst a 100K loan would have an interest rate of 9.33%.
In this example the "blended rate" would be 9.33. But the real rates would be 8.5 and 12.5. It is the same thing but "blended rate" sounds better.
It is like the 1% interest rate loans. If the rate is 1% why is the APR 4.556%? [ Edited by lacashman on Date 02/05/2005 ]
You will hear the term blended rate when you are talking about two loans taken at the same time. It is a way to keep from shocking you with the rate on the second.
Example:
First mortgage of 50% LTV with a rate of 5%.
Second mortgage of 50% LTV with a rate of 10%.
You would have a blended rate of 7.5%. It is the average rate that you will be paying.
When I was doing loans one loan that I saw a lot of was an 80/20 loan. The first was and 80% LTV loan with a rate of 8.5%. The second loan at 20% LTV had a rate of 12.5%.
On a loan for 100K the first would have interest of $566/month. The second would have interest of $208/month. Total interst of 774/month. To get the same interst a 100K loan would have an interest rate of 9.33%.
In this example the "blended rate" would be 9.33. But the real rates would be 8.5 and 12.5. It is the same thing but "blended rate" sounds better.
It is like the 1% interest rate loans. If the rate is 1% why is the APR 4.556%? [ Edited by lacashman on Date 02/05/2005 ]