A blended interest rate (or weighted average rate) is the effective rate you pay across multiple loans with different rates and balances. It is calculated by weighting each loan's rate by its balance relative to total debt, giving you a single number that represents your true overall borrowing cost.
Consolidating makes sense when a new single loan rate is lower than your blended rate and the monthly savings justify the closing costs. A good rule of thumb is that the break-even period should be shorter than the time you plan to stay in the home.
Multiply each loan's balance by its interest rate, add those products together, then divide by the total combined balance. For example, a $300k loan at 7% and a $50k loan at 9% gives (300000 x 7 + 50000 x 9) / 350000 = 7.286%.
Yes, combining a first mortgage and HELOC into a single refinanced loan is a common strategy. It can simplify payments and lower your overall rate, especially if the HELOC has a high variable rate. Use this calculator to see if the combined rate justifies the closing costs.