With mortgage rates and housing prices across the nation, it's no surprise that buyers are facing affordability hurdles. And according to a study by Bankrate, a hidden homeownership tax says making. Purchases far more expensive than they need to be. By analyzing over 3 million loan originations as.
Well as controlling for 17 different pricing factors, Bankrate found that 87% of American borrowers. Over pay on their mortgages and in pricier coastal areas such as LA, Miami and New York. Those extra costs exploded as much as six figures in wasted borrowing costs. Joining us this morning to talk housing mortgages and the overpayment problem is Jeff Ostrowski, housing market analyst at Bankrate.
Jeff, good morning. Thank you so much for joining us. So at a time when we're watching our purse strings walk us through this overpayment issue and why so many homebuyers are facing overpriced loans and leaving dollars on the table over a 30 year mortgage?
Yeah, I think everyone always realized that American consumers just don't shop around for mortgages they don't bargain for. For the best deal with a home loan in the way that they might with other products. I think a big part of it is just that the the mortgage is such a complex
product, it's difficult for most consumers to understand. The typical American buys a home every ten years. Even if you refi every five years, you're not out there doing this frequently enough that you really learn the ins and outs of the mortgage process. So I think some of it is just the consumers don't realize that they should shop around.
And another reality is that when you're buying a house, you've got a whole bunch of things that you're worried about. You want to you want to make sure you you get to the closing table on time. You've got to move. Maybe you've got another place that you're selling. You're worried about inspections. The mortgage is usually just one more thing to check off the box.
And as a result, a lot of buyers don't take time to to shop around for the best deal.
Yeah. And Jeff, when we're talking about prices, we know that the coastal cities, those metropolitan areas are pricey. Whether we're talking about New York City or Miami or LA. So why are buyers in these high priced markets also losing so much in lifetime wealth and tell us why we're seeing this happen as well as the how.
Yeah.
The intriguing thing about our findings is that this overpayment rate holds steady across the country, across geographic areas, across income levels. So most Americans, as you mentioned, 87% are overpaying for their mortgages. And and by that, we just mean that the rate that they that the typical borrower took when they, they their loan was originated was not the best rate they could have gotten.
There were better rates available at that time. And so that figure is pretty consistent. More than 80% of buyers in every major metro area over pay. But the difference is just home prices, as you mentioned. So la metro area, you're looking at $1 million median home price. And so just, you know, overpaying even a little on a mortgage is going to to become exaggerated and amplified just because of the home prices and similar findings in, in New York and in South Florida.
Intriguingly, in LA, even though that was the highest dollar amount of overpayment in our study. Um, actually slightly less, uh, folks are overpaying. We found an 83% overpayment rate in LA, compared to 87% nationally. And then, on the other hand, in the Miami metro area, it's 88% of borrowers were paying more than they could have.
Yeah. And Jeff, finally, before I let you go, let's talk about blind spots, because we all know that many buyers out there can get exhausted, right by the time closing deadlines come around. And they might be more willing than not to accept whatever rate their real estate agent or bank might recommend.
But when we're talking about both sides of the equation, tell us about structural blind spots out there and what's happening to home buyers as well as lenders.
Yeah. So I would say.
A lot of homebuyers take the the referral, referral or recommendation from the real estate agents. They just go with that person and don't get a second or third opinion. Uh, you know, maybe your your bank is blowing up your inbox with mortgage offers and you just accept that offer without shopping around.
So I think the real blind spot is that borrowers just need to take the time to compare offers. Uh, get at least three offers, ideally five. Um, and it's there's a good chance that you can get a much better deal if you take the time to negotiate and to shop around.
Well, Jeff, I think those are some key points there, especially as we're looking at higher rates for longer, at least for the time being. So Jeff, appreciate your time. Thank you so much for joining us and for sharing all of your insights with our viewers.
All right. Thank you.
