Let's say I have two loans and want to calculate the "effective" interest rate. To make things easy let's assume they have the same principal and the same terms (30 years), just two different interest rates.
I modeled this in Excel by simply matching the total payment and found (somewhat surprisingly) that the result is not equal to the average of the interest rates.
Loan 1: 100k @ 1%, monthly: $321 Loan 2: 100k @ 5%, monthly: $537 Combination: 200k monthly: $858 -> rate is 3.14%
I get different results for 0%/6%, 1%/5%, 2%/4% 3%/3% splits. How do I calculate the "effective" interest rates from the two original rates? What's the math behind that?