Mortgage overpayment costs Americans thousands of dollars per year. It’s even worse in big cities

If you’ve financed a home in one of America’s largest cities, you likely overpaid in fees and are handing over thousands in extra mortgage interest to your lender every year. 

Exclusive new Bankrate research revealed this hidden homeownership tax is costing American mortgage borrowers a little over $3,300 per year on average nationwide. This systemic mortgage overpayment is felt in big cities and small towns, but the price tag is significantly higher for big-city borrowers on an annual basis. Among the nation’s 10 largest markets, borrowers in L.A., Miami, New York City and D.C. overpay the most on their mortgages every year, with Dallas, Phoenix and Atlanta close behind. 

With over a quarter-million new loans handed out in each city in 2025 alone, these extra costs take a multi-billion-dollar toll on borrowers in these markets each year. That’s money that could otherwise build retirement wealth, pay down credit card debt or be put toward other financial goals. 

Lower rates were available to borrowers who are overpaying, but structural blind spots in the homebuying process — from lack of price transparency to real estate agents recommending specific lenders — mean most never had a fair chance to find them. 

“I think there’s often a lack of awareness,” says Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors, of mortgage shopping. “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.”

Major coastal metros lead the nation in excess mortgage costs

Across the 10 largest U.S. metros, nowhere is the sting of mortgage overpayment worse than along the coasts. There, annual overpayments consistently exceed the national average ($3,343) by thousands of dollars.

Los Angeles is the most expensive large U.S. metro for mortgage overpayment: 83% of L.A. borrowers overpay, shelling out an average of more than $8,100 in avoidable costs each year. Over a 30-year loan, that adds up to nearly $150,000 per borrower.

Miami isn’t far behind. Nearly 9 in 10 Miami buyers pay more than they need to for their mortgages, costing each an average of almost $6,400 in unnecessary interest each year, or about $118,000 over the life of the loan. In New York City and Washington, D.C., the average annual cost is roughly $6,000 and $5,800, respectively.

Coastal markets spend the most in unnecessary costs, but borrowers in Sun Belt hubs shell out thousands in inflated interest and fees, too. On average, Dallas and Phoenix buyers shoulder more than $5,000 in excess mortgage costs each year, while Atlanta buyers lose nearly $4,850 every year. 

Across all 10 major markets, overpaying is the norm: 83% to 88% of all borrowers pay more than they should. Most of these metros sit just below the 87% national average, with Houston and Chicago the only two matching or exceeding it. Although borrowers in Philadelphia overpay the least among the areas we checked, homeowners still lose an average of $4,425 every single year in avoidable mortgage costs.

Mortgage overpayments in the 10 largest U.S. metros

Why most homebuyers fall into the mortgage overpayment trap

Bankrate’s research finds that millions of buyers leave tens of thousands of dollars on the table every year when taking out a mortgage without even realizing it. 

Buyers who are exhausted and overwhelmed by the homebuying process may skip comparison shopping. Nearly half of all buyers (49%) only ever seriously consider one lender, according to the National Survey of Mortgage Originations. 

“I recommend shopping around with more than one lender to ensure that you are getting the best quoted rate,” Lautz says.

Buyers may also rely exclusively on recommendations from trusted real estate agents — but even when agents have the best intentions, they can steer buyers off course, according to Todd Newpher, a lead mortgage origination manager at Pennsylvania State Employees Credit Union.

“Real estate agents like to use a lender that they’re comfortable with working with and built a relationship with. They know that the lender is going to get their client to close on time,” Newpher says. “That’s very unfortunate because most times those folks don’t get the best deal that they could possibly get.”

Take homebuyer Ryan Katherine, who shared her experience with Bankrate earlier this year. She bought her Salt Lake City home with her partner in 2023. She got her first quote through the lender her agent recommended, but when it seemed high, she started comparison shopping. She eventually found an offer that saved her thousands of dollars over the life of the loan compared to the original. 

“I’m pretty happy because we ended up getting a small house that we could both afford,” she told Bankrate. But for every borrower like Katherine, there are others who might not even realize they can save so much by shopping around.

5 smart moves when shopping for your mortgage

Avoiding the hidden homeownership tax doesn’t require becoming a mortgage expert overnight. A few simple moves during the application process can quickly turn the tables and give you greater leverage over lenders. 

1. Get at least three mortgage quotes (and time them right)

Settling for the first quote you receive could cost you thousands in unnecessary interest and fees. Getting at least three mortgage preapprovals gives you immediate leverage, but timing matters. Aim to submit your applications within a 14- to 30-day window. Credit scoring bureaus recognize that you are rate-shopping and group these inquiries together, protecting your credit score from taking multiple hits.

2. Watch out for hidden discount points

That eye-popping low rate a lender offers might come with a catch. Lenders frequently quote attractive rates without making it clear that you’d have to pay an upfront fee, called buying mortgage points, to get that rate. Always ask the lender directly: Is this rate contingent on paying points? 

3. Compare the Annual Percentage Rate (APR), not just the interest rate

Headline rates can be deceiving. The APR reveals a more complete cost of the loan by factoring in origination charges, broker fees and some additional costs. Comparing APRs across several loan estimates gives you a more accurate, apples-to-apples view of what a lender is actually charging for your home loan.

4. Pick the mortgage that best suits your financial situation

The 30-year conventional mortgage is by far the most popular choice, but it’s also the product for which buyers are mostly likely to overpay. Bankrate’s research finds 90% of conventional loan borrowers overpay for their home loans, significantly higher than the percentages for other types of mortgages. Stepping back to evaluate different loan terms and alternative structures, like FHA loans or a 15-year mortgage, ensures you choose a mortgage that actually fits your budget, not just the market default.

5. Treat your mortgage like a negotiation

Closing costs deserve just as much scrutiny as your interest rate. Federal law requires lenders to explicitly state on the loan estimate which third-party services you can shop for, giving you room to find more affordable inspections, survey fees and title services. For non-shoppable lender charges, like origination and processing fees, use leverage: Show lenders a competing loan estimate with lower upfront fees and see if they’ll come with a better offer.

• Methodology

  Bankrate analyzed 3.2 million HMDA mortgage loan originations from 2025 and compared them against binding, competitive offers available on Bankrate’s marketplace to determine where borrowers are overpaying the most for their home loans among the 10 largest U.S. metros.

  Population rankings for the 10 largest U.S. metropolitan areas were drawn from the latest Census Bureau estimates. The analysis used data across four key sources: Bankrate’s proprietary mortgage marketplace data, the Home Mortgage Disclosure Act (HMDA) loan-level dataset, the Federal Reserve’s Survey of Consumer Finances (SCF) and loan-level disclosure data from Freddie Mac and Ginnie Mae. Together, these sources allowed us to account for competitive pricing, loan originations, borrower credit profiles and household wealth.

  To ensure a fair and accurate comparison, our statistical model controlled for 17 different factors that can influence loan pricing. Once loans were compared across datasets, we calculated four metrics:

  • • Overpayment rates (%): Estimated percentage of borrowers who received a mortgage with a higher total cost than a comparable, competitive offer available on the market at the time of their origination.

  • • Average 8-year overpayment ($): We calculated the full cost of the mortgage (all 30 years of interest payments, including upfront lender fees, discount points and lender credits) and subtracted the total cost of the matched, competitive Bankrate offer.

  • • Average annual overpayment ($): We divided the 8-year expected overpayment by eight. This reflects the average mortgage lifespan and captures front-loaded amortization costs (interest and fees) more accurately than a 30-year average.

  • • Average lifetime overpayment ($): We calculated the full cost of the mortgage (all 30 years of interest payments, including upfront lender fees, discount points and lender credits) and subtracted the total cost of the matched, competitive Bankrate offer.

  For more detailed information on the methodology and the analysis, see Bankrate’s research on the hidden homeownership tax.