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Cities Where Borrowers Save the Most by Shopping Around for Mortgage Loans – Summer 2019

If you are buying a home in San Francisco, taking the first mortgage offer you receive without shopping around could cost you more than $69,000 in interest over the life of your loan. In Albuquerque, N.M, it could cost you over $37,500.

As interest rates change, so too can the amount of money consumers save by shopping around and comparing offers. 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 APRs offered to users through the LendingTree marketplace. For example, if 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.

We used that 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.

What our study indicates is that by using LendingTree to shop around for a mortgage, the average American in the 50 largest cities can save $47,560 over the lifetime of their loan.

Key findings

  • Comparing mortgage offers before buying saves homebuyers the most money in California. The three cities where shoppers can save the most are San Francisco, Los Angeles and San Diego. Savvy shoppers can save more than $69,000 in San Francisco, over $63,000 in Los Angeles and more than $58,000 in San Diego.
  • Of the five cities where buyers can save the most by shopping around for a mortgage, the only city outside of California is Seattle. The average buyer can save $57,650 if they shop around in Seattle — No. 4 on our list. This is higher than the potential savings for buyers in places such as Sacramento, Calif., Boston and Denver.
  • The average buyer can save almost $134 a month when they shop around for a mortgage loan. On the high end, buyers in San Francisco can save $194 a month. On the low end, buyers in Albuquerque can still save $105 a month if they shop around.
  • Even less expensive cities register meaningful savings. In Albuquerque, a low median home price of $192,500 and a spread of 94 basis points adds up to $37,533 in savings over the lifetime of a loan.
  • There are significant savings for purchase borrowers in every city. The range between the highest and lowest offers varies between 83 basis points in Birmingham, Ala., and 101 basis points in Memphis, Tenn., and Louisville, Ky. This translates from $42,760 in savings in Birmingham to $54,580 in Memphis.
  • Individual borrower results will vary. Our method uses median values, so half of borrowers would see smaller savings. But, just as important, half could see larger savings. There is no way for a borrower to know where they fall without shopping around, so it is imperative to compare offers.

Cities where purchase borrowers face the largest differences in mortgage rates

No. 1: Memphis, Tenn.

  • Mortgage Rate Competition Index: 1.01
  • Median home loan amount: $260,000
  • Monthly payment savings: $153
  • Annual payment savings: $1,838
  • Lifetime interest savings: $54,580

No. 2: Louisville, Ky.

  • Mortgage Rate Competition Index: 1.01
  • Median home loan amount: $260,000
  • Monthly payment savings: $152
  • Annual payment savings: $1,829
  • Lifetime interest savings: $54,310

No. 3: San Francisco

  • Mortgage Rate Competition Index: 0.98
  • Median home loan amount: $340,000
  • Monthly payment savings: $194
  • Annual payment savings: $2,330
  • Lifetime interest savings: $69,186


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

No. 1: San Francisco

  • Lifetime interest savings: $69,186
  • Median home loan amount: $340,000
  • Monthly payment savings: $194
  • Annual payment savings: $2,330
  • Mortgage Rate Competition Index: 0.98

No. 2: Los Angeles

  • Lifetime interest savings: $63,258
  • Median home loan amount: $340,000
  • Monthly payment savings: $178
  • Annual payment savings: $2,131
  • Mortgage Rate Competition Index: 0.90

No. 3: San Diego

  • Lifetime interest savings: $58,369
  • Median home loan amount: $300,000
  • Monthly payment savings: $164
  • Annual payment savings: $1,966
  • Mortgage Rate Competition Index: 0.94


Cities where refinance borrowers face the largest differences in mortgage rates

No. 1: Louisville, Ky.

  • Mortgage Rate Competition Index: 1.36
  • Median home loan amount: $217,502
  • Monthly payment savings: $137
  • Annual payment savings: $1,647
  • Lifetime interest savings: $48,884

No. 2: New Orleans

  • Mortgage Rate Competition Index: 1.21
  • Median home loan amount: $262,502
  • Monthly payment savings: $151
  • Annual payment savings: $1,811
  • Lifetime interest savings: $53,770

No. 3: Indianapolis

  • Mortgage Rate Competition Index: 1.21
  • Median home loan amount: $250,001
  • Monthly payment savings: $141
  • Annual payment savings: $1,695
  • Lifetime interest savings: $50,335


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

No. 1: Virginia Beach, Va.

  • Lifetime interest savings: $73,489
  • Median home loan amount: $232,501
  • Monthly payment savings: $206
  • Annual payment savings: $2,475
  • Mortgage Rate Competition Index: 1.03

No. 2: Seattle

  • Lifetime interest savings: $68,292
  • Median home loan amount: $285,001
  • Monthly payment savings: $192
  • Annual payment savings: $2,300
  • Mortgage Rate Competition Index: 1.04

No. 3: Greenville, S.C.

  • Lifetime interest savings: $67,368
  • Median home loan amount: $220,001
  • Monthly payment savings: $189
  • Annual payment savings: $2,269
  • Mortgage Rate Competition Index: 1.07


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 white paper on the LendingTree website.

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 provided. 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.

 


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