Are You Overpaying on Your Mortgage?

Buying a home is one of the biggest purchases you’ll ever make. But there’s a good chance you’re paying more for your mortgage than you should be.

An eye-opening new analysis from Bankrate found that a staggering 87% of borrowers who took out a mortgage in 2025 paid more than the most competitive rate available to them, meaning the typical mortgage holder pays an estimated $3,343 more per year than necessary. Over the life of the loan, that can add up to about $78,186 in additional costs.

For older homeowners, the stakes can be even higher. 

The “Seniority” Tax

Among people buying homes, age makes almost no difference. About 90% to 91% of borrowers in every age group paid more than the most competitive rate available to them. But refinancing tells a different story. The share of borrowers paying above the competitive rate is 72% among those under 35 and 76% for people ages 35 to 44. That rate climbs to 82% among those 55 to 64, 81% for borrowers between the ages of 44 and 54, and 81% for those 64 and older.

That age gap is what Bankrate calls the “Seniority Tax.”

“The Seniority Tax in refinance transactions may reflect the interaction of several reinforcing dynamics,” the report notes. One of them is that “[f]inancial urgency appears to diminish with age as rising incomes, accumulated equity, and lower debt burdens reduce search intensity.” Older borrowers may also be inclined to stick with banks they already have relationships with — and those institutions have little incentive to offer these customers competitive rates. 

But there are other factors as well. According to the report, “Cognitive and social factors associated with aging — including greater institutional trust, reduced tolerance for the friction of comparison shopping, and lower engagement with digital rate-comparison tools — could compound the behavioral shift. And some portion of the gap may reflect pricing strategies explicitly calibrated to the lower search intensity of older cohorts.” 

No matter what drives the phenomenon, though, the report notes that “the outcome is consistent: a market that appears to extract disproportionately from borrowers at precisely the stage of life when wealth, credit quality, and institutional relationships are at their peak.”

Interestingly, the research found that the borrowers most likely to overpay weren’t those with poor credit or limited financial resources. In fact, some of the homeowners paying the most appeared to have the strongest financial profiles.

So how does this happen — and what can you do to make sure you’re getting the best rate possible?

Why So Many Homebuyers Overpay

The process of getting a mortgage is complicated, so it can be extremely tempting to simply use a lender your real estate agent, bank, or a friend or family member recommends. But that convenience can come at a price.

Bankrate found that nearly 90% of borrowers rely on recommendations when choosing a mortgage lender. “While they may offer convenience, these sources generally lack the tools or incentives to comprehensively search the broader market,” the report notes. “The same is true for mortgage brokers relying on real estate agent referrals; under federal regulations like Dodd-Frank, they are under no legal obligation to secure the lowest market rate or actively facilitate lender competition.”

And shopping around isn’t always easy. A typical mortgage contract is roughly 50 pages long, and borrowers may have just 48 to 72 hours between having an offer accepted and needing to lock in their mortgage rate. “The process is defined by high complexity and poor timing,” Bankrate’s report explains.

Great Credit Doesn’t Guarantee a Great Rate

Having an impressive credit score is an achievement all its own, and one that will likely make it easier to qualify for a mortgage. But Bankrate’s analysis suggests an excellent credit history doesn’t necessarily translate to a great rate.

Borrowers with debt-to-income ratios between 33% and 38% had the highest overpayment rate of any group, at 92%. (According to Citizens Bank, a solid debt-to-income ratio is 36% or less.)

The reason, Bankrate concluded, is that borrowers who are confident they’ll qualify for a loan may be less incentivized to shop around for a better rate. However, knowing you can get a mortgage isn’t the same as knowing you’re getting the best mortgage.

How To Avoid Overpaying on Your Mortgage

While homebuying can feel overwhelming, a few simple steps can help you shop smarter, negotiate harder, and avoid unnecessarily forking over the cost of a brand-new Range Rover over the life of your loan. Here are some tips on how to make sure you’re getting the best rate possible.

• Shop Around: Your bank, realtor, friend, or family member may point you toward a lender they really trust, but that doesn’t automatically mean you’re getting the best deal. Still, Bankrate found that nearly 90% of borrowers rely on recommendations from these sources. You should get quotes from multiple lenders and compare what each is offering instead. Bankrate’s central finding is that competitive pricing does exist, but borrowers have to actively seek it out.

• Compare the Total Cost, Not Just the Rate: A mortgage with the lowest advertised interest rate isn’t necessarily the cheapest loan. Consider interest, discount points, origination charges, lender fees, and other closing costs when comparing offers.

• Make Lenders Compete for Your Business: Once you have multiple offers, use them as leverage. Ask a lender whether it can match or beat a competing offer rather than assuming its first quote is final.

• Read the Fine Print: Mortgage documents can run roughly 50 pages, according to Bankrate, so don’t focus solely on the monthly payment or headline rate. Look at points, fees, and other up-front costs, too.

A little legwork now could save you thousands over the life of your loan.

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