Definition of Blended rate:
A blended rate is an interest rate charged on a loan that represents the combination of a previous rate and a new rate. Blended rates are usually offered through the refinancing of existing loans that are charged a rate of interest that is higher than the old loan's rate, but lower than the rate on a brand-new loan.
An interest rate applied to a refinanced loan that is higher than the rate of the old loan but lower than the current rate offered on new loans. Blended rates are usually offered by lenders as incentives for borrowers to refinance existing low-interest rate loans instead of offering a purchaser the chance to assume the loan. For example, if current rates are 10 percent, and a buyer can assume a loan at 7 percent, the lender may offer 8 percent financing to entice the buyer to get new financing instead of assuming the old mortgage.
This type of rate is calculated for accounting purposes to better understand the true debt obligation for multiple loans with different rates or the revenue from several streams of interest.
How to use Blended rate in a sentence?
- To calculate the blended rate, most often you will take the weighted average of the interest rates on the loans.
- Blended rates can apply to refinanced corporate debt, or to consumer loans, such as a refinanced mortgage.
- A blended rate is an interest rate charged on a loan that represents the combination of a previous rate and a new rate.
Meaning of Blended rate & Blended rate Definition