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By Giulia Carbonaro
Senior Reporter
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Most U.S. homeowners are likely overpaying for their mortgages, according to a recent study by Bankrate that found a majority of borrowers are paying about $3,300 more per year than they should.
About 87 percent of homebuyers do not get the lowest mortgage rate available to them when they purchase their home, simply because they do not shop around and lenders have no interest in directing them elsewhere.
Bankrate, a personal finance website, reached that number by comparing 3.2 million 2025 mortgage originations against rates from its own marketplace. It calculated that, across all mortgages originated since 2022, those homebuyers lost a collective $65 billion a year in mortgage overpayments.
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This "hidden" homeownership financial burden costs the typical U.S. borrower $78,186 in extra interest and fees over a 30-year loan, Bankrate calculated.
"The dream of homeownership feels increasingly out of reach for millions of Americans, so it's worth asking whether the problem is the market or the process," Bankrate CEO Matt Fellowes, the primary author of the study, said in a statement.
"Our research suggests that for most borrowers, competitive rates exist; borrowers just never see them. When lenders compete for a borrower's business, the savings are meaningful and immediate: $279 a month on average, an amount that puts homeownership out of reach for many borrowers."
Where Are Homeowners Overpaying the Most?
How much homeowners overpay in mortgages depends heavily on where in the country they are located, according to Bankrate's analysis. From Texas to California, borrowers in Western and Southern metropolitan areas lock in mortgage rates well above what they actually qualify for, researchers found.
Borrowers in Pennsylvania had the highest rate of overpayment, at 90.2 percent (overpaying by about $3,000 a year), followed by Oregon with 90.1 percent (overpaying by about $4,000 a year). The lowest overpayment rates were reported in Iowa (83.1 percent, or $2,000 a year), Colorado (83.2 percent, or $4,000 a year), Arizona and South Dakota (each at 84.2 percent, respectively $4,000 and $3,000 a year).
However, the highest lifetime tax percentages—overpayment amounts relative to the loan balances—were found to be paid in New Hampshire (23 percent), Illinois (23 percent), New Jersey (22.9 percent) and Florida (22.6 percent).
Borrowers were missing the market's most competitive rates by more than 0.8 percentage points on average in a handful of Sun Belt and Midwest metros, Bankrate found, either because they faced less competitive local pricing or they were less likely to shop—or both.
Despite regional and local differences, homeowners all across the country are paying more than they would need to for their mortgages.
How Can You Avoid It?
Though widespread, overpaying for your mortgage is "completely avoidable," according to Bankrate. The most important thing is to check out all your options before settling on one mortgage deal.
"People don't seem to understand that there is even an opportunity to shop [around for mortgage rates]," Alexei Alexandrov, a mortgage industry researcher and former chief economist of the Federal Housing Finance Agency, told Bankrate.
"When you ask them just a simple yes or no question, 'Do you think that every mortgage lender will offer you exactly the same rate?' Most people say yes," Alexandrov said, adding, "Not many people realize just how much money there is to be saved and just how much of a difference even 25 basis points [0.25 percent] on your rate could save you over the course of the mortgage."
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Once a homebuyer obtains multiple offers, they are able to negotiate a lower price with the lender of their choice. While only a small part of the homebuying process, getting a lower borrowing fee can make the difference between being able to afford a home or being priced out of the market.
That is especially true now that mortgage rates, after falling to their lowest level since 2022 toward the end of February, are on the rise again. On Thursday, Freddie Mac reported that the 30-year fixed-rate mortgage averaged 6.69 percent in the week ending August 6—marking the highest level since July 2025, when it reached 6.72 percent.
But the responsibility to avoid overpaying for mortgages compared to the best offers available on the market should not fall on homebuyers alone, according to Bankrate. The company is advocating for two market-based policy responses:
- A requirement that lenders disclose a benchmark rate for similarly qualified borrowers alongside any mortgage offer;
- A voluntary certification framework for lenders that compete in transparent multi-lender marketplaces.
Neither initiative would require new government programs, the company said.
Contact Newsweek editors on this story: Ben Kelly and Shakeema Edwards.
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