What is Weighted Average Coupon (WAC)?
Weighted Average Coupon is the average interest rate of a loan pool, weighted by each loan's outstanding balance. WAC = Σ(balance_i × rate_i) / Σ(balance_i). A pool with two loans, $500K at 6.0% and $300K at 7.0%, has a WAC of 6.375%. WAC is one of the most important pool-level statistics because it determines the gross income the pool generates. LoanBook amortizes each loan at its gross note rate; servicing is charged as a separate cost line in the cashflow projection rather than being netted out of the coupon.
Formula
WAC = Σ(current_balance_i × note_rate_i) / Σ(current_balance_i)
How LoanBook Uses Weighted Average Coupon
LoanBook calculates WAC automatically from loan tape data and displays it in portfolio summary statistics. WAC is used as the gross rate input in cashflow projections and spread calculations.
Frequently Asked Questions
What is the difference between WAC and BEY?
WAC is the average coupon rate on the pool, what the borrowers pay. BEY is the yield to the investor after accounting for purchase price, prepayments, defaults, losses, and servicing. WAC is a pool characteristic; BEY is an investment return.
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