The Blended Rate Strategy: How to Keep Your 3% Mortgage

The Golden Handcuffs

Millions of Americans are trapped. They have a 3% mortgage from 2021, but they need cash. They qualify for a Cash-Out Refinance, but trading a 3% rate for a 7% rate on a $400,000 loan would cost them $1,000+ extra per month.

The Solution: The Blended Rate.

Instead of refinancing the whole loan, you keep your cheap first mortgage exactly as it is. You take out a HELOC (at say, 9%) only for the cash you need. Your "effective" interest rate on the total debt is a weighted average of the two.

The Math

• First Mortgage: $400,000 at 3.0%
• HELOC: $50,000 at 9.0%
• Total Debt: $450,000
• Blended Rate: ((400k * 3%) + (50k * 9%)) / 450k = 3.66%

By using this strategy, your effective interest rate is 3.66%.
If you did a Cash-Out Refinance for the whole $450k at 7%, your rate would be... 7%.

Why This Wins

The Blended Rate strategy is the #1 way to access equity in a high-rate environment. It minimizes the damage of high rates by quarantining the high rate to only the small portion of new money you are borrowing.