LendingTree Study: Cities Where Borrowers Save the Most by Shopping Around for a Mortgage in Q3 2019

If you’re buying a home in San Francisco, taking the first mortgage offer you receive without shopping around could cost you nearly $69,500 in interest over the life of your loan. In Albuquerque, N.M, it could cost you close to $36,500. In other words, it pays to do your research.

 As interest rates change, so do the savings you can reap from shopping around for a mortgage lender. To help consumers understand how much they can save, LendingTree created a Mortgage Rate Competition Index, which measures the basis point spread between high and low annual percentage rates, or APRs, offered to users through the LendingTree marketplace. We’ve reported our latest findings below through the third quarter of 2019. You can compare these numbers to our previous quarterly report.

What the index means for you

Let’s say a borrower is offered two loans on the LendingTree platform — one with an APR of 4% and another with an APR of 3.5% — the spread would be 0.5%, or 50 basis points. The wider the index, the more a potential buyer can save by shopping around with multiple lenders.

We use the index to analyze the difference in rates and potential savings for mortgage shoppers in the 50 largest cities in the United States. This is a more detailed view of the national data we crunch every week in our Mortgage Comparison Shopping Report. By using LendingTree to shop around for a mortgage, a buyer could potentially save an average of about $52,000 over the life of their loan.

Key findings

  • Comparing mortgage offers can yield big savings to purchase borrowers in some of the nation’s most expensive cities. The three cities where purchase borrowers can save the most are San Francisco, Seattle and Denver. Savvy shoppers can save $69,476 in San Francisco, $65,282 in Seattle, and $60,706 in Denver. 
  • Refinance borrowers can also see tremendous savings by shopping around for the best rate. The cities where refinance borrowers can save the most are San Diego, Washington, D.C., and San Francisco, where median savings are $74,257, $74,099 and $72,906, respectively. 
  • Even in cities where savings aren’t as high as they are in San Francisco or Denver, substantial savings are possible. For example, buyers in Albuquerque, N.M. (where potential purchase loan savings are the lowest) could still save $36,476 if they shop around for the best rates. In San Antonio, the city where potential refinance savings are the lowest, refinancers can still save nearly $50,736 over the life of their loan.
  • Cutting back the total interest paid over the lifetime of a loan can translate into meaningful savings on a yearly and monthly basis. For example, purchase borrowers could save an average of $146 a month or about $1,751 a year, while refinance borrowers can save about $176 a month or about $2,107 a year. 
  • Individual borrower results will vary. Our method uses median values, so half of borrowers will see lower savings. However, half of borrowers could save more money. Unless you shop around, though, you won’t know how much you could potentially save.

Cities where purchase borrowers could save the most in lifetime interest payments

No. 1: San Francisco

  • Lifetime interest savings: $69,476
  • Median home loan amount: $353,125
  • Monthly payment savings: $195
  • Annual payment savings: $2,339
  • Mortgage Rate Competition Index: 0.98

No. 2: Seattle

  • Lifetime interest savings: $65,282
  • Median home loan amount: $337,500
  • Monthly payment savings: $183
  • Annual payment savings: $2,198
  • Mortgage Rate Competition Index: 0.96

No. 3: Denver

  • Lifetime interest savings: $60,706
  • Median home loan amount: $332,500
  • Monthly payment savings: $170
  • Annual payment savings: $2,044
  • Mortgage Rate Competition Index: 0.91

 

Cities where purchase borrowers face the largest differences in mortgage rates

No. 1: Hartford, Conn.

  • Mortgage Rate Competition Index: 1.13
  • Median home loan amount: $236,250
  • Monthly payment savings: $151
  • Annual payment savings: $1,808
  • Lifetime interest savings: $53,698

No. 2: Virginia Beach, Va. 

  • Mortgage Rate Competition Index: 1.11
  • Median home loan amount: $253,750
  • Monthly payment savings: $159
  • Annual payment savings: $1,911
  • Lifetime interest savings: $56,758

No. 3: Greensboro, N.C. 

  • Mortgage Rate Competition Index: 1.10
  • Median home loan amount: $260,000
  • Monthly payment savings: $161
  • Annual payment savings: $1,937
  • Lifetime interest savings: $57,529

 

Cities where refinance borrowers could save the most in lifetime interest payments

No. 1: San Diego

  • Lifetime interest savings: $74,257
  • Median home loan amount: $345,001
  • Monthly payment savings: $208
  • Annual payment savings: $2,500
  • Mortgage Rate Competition Index: 1.07

No. 2: Washington, D.C.

  • Lifetime interest savings: $74,099
  • Median home loan amount: $325,000
  • Monthly payment savings: $208
  • Annual payment savings: $2,494
  • Mortgage Rate Competition Index: 1.13

No. 3: San Francisco 

  • Lifetime interest savings: $72,906
  • Median home loan amount: $350,001
  • Monthly payment savings: $205
  • Annual payment savings: $2,454
  • Mortgage Rate Competition Index: 1.04

 

Cities where refinance borrowers face the largest differences in mortgage rates

No. 1: Harrisburg, Pa. 

  • Mortgage Rate Competition Index: 1.27
  • Median home loan amount: $225,000
  • Monthly payment savings: $161
  • Annual payment savings: $1,935
  • Lifetime interest savings: $57,494

No. 2: Oklahoma City

  • Mortgage Rate Competition Index: 1.26
  • Median home loan amount: $250,001
  • Monthly payment savings: $178
  • Annual payment savings: $2,135
  • Lifetime interest savings: $63,430

No. 3: Indianapolis

  • Mortgage Rate Competition Index: 1.24
  • Median home loan amount: $275,000
  • Monthly payment savings: $192
  • Annual payment savings: $2,302
  • Lifetime interest savings: $68,391

 

What is the Mortgage Rate Competition Index?

The LendingTree Mortgage Rate Competition Index is a proprietary measure of the dispersion in mortgage pricing. It measures the APR spread of the best offers available on LendingTree relative to the least competitive (i.e., the highest) rates on 30-year, fixed-rate mortgages. Our research shows that mortgage rate competition varies with the financial and operational measures of activity in the mortgage markets. More details on the index are available in a LendingTree white paper.

How is the index formulated?

A mortgage shopper enters their information on LendingTree.com. They input loan variables, including the proposed amount and down payment, and property variables, including property type and location. Using our proprietary algorithm, LendingTree matches borrowers with lenders based on the criteria they provide. Interested lenders return a rate and fee offer. For our index, we combine the rate and fees into an APR and calculate the spread as follows:

The spread is the difference between the highest and lowest offers. In this example, 4.62-4.21 = 0.41. We repeat this calculation across 30-year, fixed-rate loans and then find the median of the individual spread, which is our index value. This is done separately for the population of purchase and refinance loan requests.

For the purposes of this study, we used data on the combined statistical area (CSA) or metropolitan statistical area (MSA) levels to approximate data on a city level.

LendingTree research analyst Jacob Channel contributed to this report.