Question

The current rates for an 80/20 mortgages are 4.15% for the first mortgages and 9.75% for the second mortgage. On a $200,000 30 year mortgage, what is the actual rate

Answer 1

Answer: The actual rate of the mortgage is 5.27%.

Since we're taking two mortgages for a total of $200,000 for 30 years, we can find the actual rate of the mortgage by finding the weighted average of the two rates. The weights in this case will be the proportion of loan taken at each rate

We have

Rates Weights Rates * Weights

4.15 0.80
`4.15 * 0.80 = 3.32`

9.75 0.20
`9.75 * 0.20 = 1.95`

Total 5.27%