Blended Rate

1. Rate in an assumable mortgage (also a Wraparound Mortgage combining a first and second mortgage), combining the old, below market rate and the new higher rate.

2. In commercial loan refinancings, a formula rate used to adjust for the current rate; a fair and equitable composite rate. For example, if the borrower's old rate is 7%, and the current market rate is 12%, the lender may agree to make the loan at 9%, provided the borrower maintains a compensating balance and/or brings in additional collateral.

3. In cost of funds accounting, a Pooled Cost of Funds, for example, a blend of the Federal Funds rate and the bank certificate of deposit rate.

An Interest Rate applied to a Refinanced loan, that is higher than the rate on the old loan but lower than the rate offered on new loans. Generally offered by the lender to induce home buyers to refinance existing, low-interest rate loans as an alternative to assuming the existing loan. Compare Assumption of Mortgage.
Example: Jones wishes to sell a home to Brown. Brown can assume the existing loan of $60,000 at an interest rate of 6%. Jones's lender offers the alternative of refinancing the loan for $120,000 at a blended rate of 8%. Brown could get a new loan at a rate of 10%.