Blended Rate Law and Legal Definition
Blended rate is a rate in an assumable mortgage combining the old, below market rate and the new higher rate. It is an interest rate charged on a loan, which is in between a previous rate and the new rate. Blended rates are usually offered through the refinancing of previous loans, and charge a rate that is higher than the old loan's rate but lower than the rate on a new loan. It is a rate that is calculated for accounting purposes to better understand the debt obligation for several loans with different rates or the revenue from streams of interest income. The blended rate is used to calculate the pooled cost of funds. Banks use a blended rate to retain customers and increase loan amounts to proven, creditworthy clients. The blended rate is used in cost-of-funds accounting to quantify liabilities or investment income on a balance sheet.