City-Data Forum how to calculate avg. rate on an 80/15 loan? (interest rate, payment, interest)
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10-22-2007, 10:41 AM
 909 posts, read 3,382,982 times Reputation: 435

How do you calculate the actual rate on an 80/15 loan? (with 5% down payment)

Is it (.8 x rate 1)+(.15 x rate 2)?

thanks

10-22-2007, 11:49 AM
 Location: weddington 373 posts, read 1,309,414 times Reputation: 181
That is correct. You are officially smarter than a 5th grader.

10-22-2007, 12:43 PM
 Location: Charlotte, North Carolina 5,137 posts, read 15,100,301 times Reputation: 1008
are you asking for the 'average rate' of the two rates?

10-22-2007, 12:55 PM
 909 posts, read 3,382,982 times Reputation: 435
I'm trying to figure out my avg weighted mortgage rate, since there are 2 loans involved.

In my calculation above, my totals only add up to .95 (.8+.15). Does this mean I'm not accounting for 5% of the loan? I'm confused. Do I need to change it so that the loans add up to a whole 1?

10-28-2007, 12:13 PM
 Location: Orlando FL 1,065 posts, read 3,673,620 times Reputation: 424
Figure out what your paying yearly in interest on each loan, add the interest together

Loan Amt1*Rate1= Yearly interest
+
Loan Amt2* rate 2= Yearly interest 2

=Total yearly interest

Take TYI from above and divide by total mortgage amount (add principal amounts of Mtg 1 and 2)

You should get a decimal at this point. Multiply the decimal by 100 to get your average percentage.

Been awhile, anyone want to confirm my math?

10-28-2007, 05:53 PM
 3,751 posts, read 10,213,886 times Reputation: 6560
Basically you're weighting your interest rates

So you have [85/95 (Rate1) + 15/95 (Rate 2)]

So - if you had a rate of 6.5% on Loan 1, and a rate of 10% on loan 2:

= 0.894 x 0.065 + 0.157 (0.10)
= 0.05811 + 0.0157
= 0.07381
= 7.3%

Remeber that 95 is 100% of your loan amount, that's why you have to do 85/95 + 15/95 = 95/95 = 100%

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