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Weighted Rate Formula:
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The Weighted Mortgage Interest Rate calculates the average interest rate across multiple mortgage loans, weighted by their principal amounts. This provides a more accurate representation of the overall interest burden than a simple average.
The calculator uses the weighted average formula:
Where:
Explanation: The formula calculates the average interest rate where each loan's rate is weighted by its principal amount, giving larger loans more influence on the final result.
Details: Calculating the weighted average interest rate is crucial for understanding the true cost of multiple mortgage loans, comparing loan portfolios, and making informed refinancing decisions.
Tips: Enter principal amounts separated by commas in the first field and corresponding interest rates (as percentages) separated by commas in the second field. Ensure both lists have the same number of values.
Q1: Why use weighted average instead of simple average?
A: Weighted average accounts for the different sizes of loans, giving more weight to larger loans, which provides a more accurate representation of overall interest costs.
Q2: Can I use this for other types of loans?
A: Yes, this calculation works for any type of debt where you want to calculate the overall interest rate across multiple loans with different principals.
Q3: What if I have loans in different currencies?
A: Convert all principal amounts to a common currency before calculation to ensure accurate results.
Q4: How does this help in refinancing decisions?
A: Knowing your weighted average rate helps you determine if a new consolidated loan offer has a lower overall rate than your current portfolio.
Q5: Should I include fees in this calculation?
A: This calculator focuses on interest rates only. For a complete cost analysis, you should also consider origination fees, closing costs, and other charges.