Average mortgage rates may be near the lowest levels ever recorded, but if you're buying a house or refinancing you can't expect a lender will always offer you a rock-bottom rate.
Borrowers who don't shop around for their mortgages can find themselves paying far too much in interest costs, as much as $47,000 more than you should over the life of a 30-year mortgage, according to a new analysis from LendingTree.
The study found that different lenders can offer the same homebuyer or homeowner rates that vary by 1 full percentage point or more.
Nailing a lower mortgage APR can save you thousands
LendingTree focused on mortgage APRs, or annual percentage rates, and they're higher than the standard interest rates you're used to seeing. Those rates this week are averaging a near-record 3.18% for a 30-year loan, in the closely followed survey from mortgage company Freddie Mac.
An APR gives a broader look at the annual cost of the loan by taking the interest rate and rolling in closing costs, the fees known as "discount points" and other borrower charges.
The research, using data from May, finds the average APRs offered to homebuyers with the best credit scores — 760 or higher — ranged from 3.30% all the way up to 4.12% for 30-year mortgages in the amount of $250,000.
Someone with top credit who clinched a high rate without shopping around to find a low one would pay almost $42,000 in additional interest over the 30-year span of the loan, the study says.
Moving down the credit score ladder, LendingTree found that:
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Homebuyers with credit scores between 720 and 759 could save up to $44,000 in lifetime interest by shopping around. Lenders offered these borrowers average APRs ranging from 3.33% to 4.20%.
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Buyers with credit scores between 680 and 719 could score lifetime interest savings of as much as $47,000, roughly speaking. Lenders offered these borrowers average APRs of between 3.50% and 4.40%.
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Buyers with credit scores between 640 and 679 could save as much as $44,000 in lifetime interest by comparison shopping. These borrowers were offered average APRs ranging from 3.79% to 4.63%.
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Buyers with credit scores below 640 could achieve lifetime interest savings up to $25,000. These borrowers were offered average APRs of 3.77% to 4.26%.
Haven't seen your credit score in a while? It's easy to get a peek at it for free.
The lesson is to shop (around) 'til you drop
LendingTree also found big spreads on the rates on refinance loans sought by homeowners.
For example, an owner refinancing into a 20-year, $200,000 loan and having a credit score between 640 and 679 was offered average rates ranging from 3.46% to 4.60% — a difference of over 1 full percentage point.