Advertisement
U.S. markets open in 6 hours 26 minutes
  • S&P Futures

    5,208.00
    -6.75 (-0.13%)
     
  • Dow Futures

    39,214.00
    -9.00 (-0.02%)
     
  • Nasdaq Futures

    18,181.50
    -50.00 (-0.27%)
     
  • Russell 2000 Futures

    2,046.80
    -3.00 (-0.15%)
     
  • Crude Oil

    82.51
    -0.21 (-0.25%)
     
  • Gold

    2,159.60
    -4.70 (-0.22%)
     
  • Silver

    25.11
    -0.15 (-0.61%)
     
  • EUR/USD

    1.0868
    -0.0008 (-0.08%)
     
  • 10-Yr Bond

    4.3400
    0.0000 (0.00%)
     
  • Vix

    14.33
    -0.08 (-0.56%)
     
  • GBP/USD

    1.2706
    -0.0023 (-0.18%)
     
  • USD/JPY

    150.3210
    +1.2230 (+0.82%)
     
  • Bitcoin USD

    64,754.26
    -3,626.72 (-5.30%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,722.55
    -4.87 (-0.06%)
     
  • Nikkei 225

    40,003.60
    +263.20 (+0.66%)
     

If you don't compare mortgage rates, here's how much you lose

If you don't compare mortgage rates, here's how much you lose
If you don't compare mortgage rates, here's how much you lose

Average mortgage rates may be near the lowest levels ever recorded, but if you're buying a house or refinancing you can't expect a lender will always offer you a rock-bottom rate.

Borrowers who don't shop around for their mortgages can find themselves paying far too much in interest costs, as much as $47,000 more than you should over the life of a 30-year mortgage, according to a new analysis from LendingTree.

The study found that different lenders can offer the same homebuyer or homeowner rates that vary by 1 full percentage point or more.

Nailing a lower mortgage APR can save you thousands

mortgage rates
emilie zhang / Shutterstock

LendingTree focused on mortgage APRs, or annual percentage rates, and they're higher than the standard interest rates you're used to seeing. Those rates this week are averaging a near-record 3.18% for a 30-year loan, in the closely followed survey from mortgage company Freddie Mac.

An APR gives a broader look at the annual cost of the loan by taking the interest rate and rolling in closing costs, the fees known as "discount points" and other borrower charges.

The research, using data from May, finds the average APRs offered to homebuyers with the best credit scores — 760 or higher — ranged from 3.30% all the way up to 4.12% for 30-year mortgages in the amount of $250,000.

Someone with top credit who clinched a high rate without shopping around to find a low one would pay almost $42,000 in additional interest over the 30-year span of the loan, the study says.

Moving down the credit score ladder, LendingTree found that:

  • Homebuyers with credit scores between 720 and 759 could save up to $44,000 in lifetime interest by shopping around. Lenders offered these borrowers average APRs ranging from 3.33% to 4.20%.

  • Buyers with credit scores between 680 and 719 could score lifetime interest savings of as much as $47,000, roughly speaking. Lenders offered these borrowers average APRs of between 3.50% and 4.40%.

  • Buyers with credit scores between 640 and 679 could save as much as $44,000 in lifetime interest by comparison shopping. These borrowers were offered average APRs ranging from 3.79% to 4.63%.

  • Buyers with credit scores below 640 could achieve lifetime interest savings up to $25,000. These borrowers were offered average APRs of 3.77% to 4.26%.

Haven't seen your credit score in a while? It's easy to get a peek at it for free.

The lesson is to shop (around) 'til you drop

Young couple watching online content in a smart phone sitting on a sofa at home in the living room.
tsyhun / Shutterstock

LendingTree also found big spreads on the rates on refinance loans sought by homeowners.

For example, an owner refinancing into a 20-year, $200,000 loan and having a credit score between 640 and 679 was offered average rates ranging from 3.46% to 4.60% — a difference of over 1 full percentage point.

Landing the lowest rate instead of the highest one would save a borrower nearly $29,000 over the full course of the loan, according to the LendingTree study.

Many people incorrectly think lenders all stick to some kind of rule that says a particular person should be charged a particular rate, but that's just not the case, says LendingTree senior research analyst Kali McFadden.

"Lenders do follow an underwriting schema, but they also have a variety of reasons why they might make different offers to the same borrower, and it's an absolute shame to pay so much more for something than you have to," McFadden says.

The message is clear: You've got to shop around and compare rates from several lenders, not take the first loan you're offered. By sniffing out the best rate available to you, you'll save big over time — and get a smaller monthly mortgage payment.

"Just think of what even saving $20 a month could do for someone's retirement nest egg," says McFadden.

Advertisement