PHOENIX — Nearly nine in 10 homebuyers are paying more than necessary for their mortgages because they fail to compare offers from multiple lenders, according to a new analysis by Bankrate.
Bankrate found the typical borrower pays more than $3,300 a year in additional mortgage costs by not securing the most competitive interest rate. Over the life of a 30-year mortgage, that amounts to an estimated $78,186 in extra costs.
Alex Gailey, a Bankrate analyst, said the issue affects the vast majority of people who have purchased homes since 2022.
“It’s a $65 billion annual drag on American household wealth,” Gailey said, according to the analysis.
Could be Used for Other Debt
Gailey said those additional mortgage costs represent money that households could otherwise use to pay off credit card debt, increase retirement savings or help fund a child’s education.
The analysis concluded that one of the most effective ways for borrowers to reduce those costs is to compare mortgage offers from multiple lenders rather than accepting the first recommendation they receive.
“Ultimately, lenders should be competing for your business,” Gailey said. “What is happening a lot of the time is that borrowers are going out there, they’re getting one recommendation from a realtor or a family or a friend and they’re just going with that option.”
Underestimating Savings
Gailey said many buyers underestimate how much money they can save by shopping for a mortgage before locking in a loan.
Bankrate recommended that borrowers obtain rate quotes from multiple lenders on the same day to ensure meaningful comparisons, while also evaluating lender fees and other closing costs in addition to the interest rate when determining the best overall mortgage offer.
