NEW YORK — Mortgage borrowers in the nation’s largest metropolitan areas are paying thousands of dollars a year in potentially avoidable interest and fees, with homeowners in Los Angeles facing more than $8,100 annually in excess costs, according to new research from Bankrate.
Bankrate estimated that mortgage borrowers nationwide overpay by an average of $3,343 annually because they did not obtain the lowest mortgage rate available to them.
The financial information company found the costs are substantially higher in many major metropolitan areas, particularly along the coasts. Los Angeles, Miami, New York and Washington had the highest average annual overpayments among the 10 largest U.S. markets examined by Bankrate, followed by Dallas, Phoenix and Atlanta.
Bankrate said between 83% and 88% of borrowers in each of the 10 metropolitan areas studied are paying more than necessary on their mortgages.
Los Angeles Borrowers Face Highest Costs
Los Angeles ranked as the most expensive major metropolitan area for mortgage overpayments, according to Bankrate.
The analysis found 83% of Los Angeles borrowers were overpaying, with those borrowers incurring an average of more than $8,100 in avoidable costs annually. Bankrate estimated that could amount to nearly $150,000 over a 30-year mortgage.
Miami ranked second, with nearly nine in 10 borrowers paying more than necessary. Bankrate estimated those borrowers incur almost $6,400 in unnecessary interest annually, or approximately $118,000 over the life of a mortgage.
Average annual overpayments were approximately $6,000 in New York and $5,800 in Washington, according to the research.
The problem was not limited to coastal markets.
Bankrate found borrowers in Dallas and Phoenix paid more than $5,000 annually in excess mortgage costs, while Atlanta borrowers paid nearly $4,850.
Philadelphia had the lowest average overpayment among the 10 markets studied, but borrowers there still incurred an estimated $4,425 annually in potentially avoidable costs, Bankrate said.
Lack of Mortgage Shopping Cited
Bankrate attributed much of the overpayment to shortcomings in the mortgage-shopping process, including limited price transparency, buyers considering too few lenders and borrowers relying on lender recommendations from real estate agents.
Nearly half of homebuyers, 49%, seriously consider only one lender, according to the National Survey of Mortgage Originations cited by Bankrate.
“I think there’s often a lack of awareness,” Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors, told Bankrate. “What could be going on, too, is you worked with someone in the past, and so you’re not shopping around based on your current financial situation.”
Lautz recommended consumers obtain quotes from more than one lender to determine whether they are receiving the best available rate.
Bankrate said lower rates were available to borrowers identified as overpaying, but many borrowers did not find those offers during the homebuying process.
Credit Union Executive Points to Agent Referrals
Todd Newpher, lead mortgage origination manager at Pennsylvania State Employees Credit Union, told Bankrate that borrowers also can be influenced by real estate agents who recommend lenders with whom they have established relationships.
“Real estate agents like to use a lender that they’re comfortable with working with and built a relationship with,” Newpher told Bankrate. “They know that the lender is going to get their client to close on time.”
Newpher said that convenience does not necessarily translate into the lowest borrowing costs.
“That’s very unfortunate because most times those folks don’t get the best deal that they could possibly get,” he said.
Bankrate estimated that more than a quarter-million new mortgages were originated in each of the major markets examined during 2025. Taken together, the additional interest and fees represent billions of dollars in annual costs that otherwise could be directed toward retirement savings, paying down other debt or other household financial priorities, according to the analysis.
