Consumers who don't shop around for better quotes are leaving money on the table
Mortgage borrowers who shop around for rate quotes could save more than thousands of dollars over the life of the loan, Freddie Mac said in its April Insight.
Freddie Mac found that just one additional rate quote could help a borrower save $1,500 on average over the life of the loan. The amount could even increase with multiple quotes. The finding follows an examination into the rate dispersion for 30-year fixed mortgages across lenders during a typical week.
“By shopping more than one mortgage lender, consumers are more likely to get a better interest rate and save money in both the short and long term,” Freddie Mac Deputy Chief Economist Len Kiefer said. “With lower monthly payments and lower fixed fees, the loan will be more affordable and thus safer, and consumers may have hundreds or thousands of dollars more in their pockets. Not a bad return for a few phone calls or clicks.”
Freddie Mac found that 80% of borrowers who got another rate quote while shopping for a mortgage would save between $966 and $2,086 over the life of the loan. For 80% of borrowers, obtaining five quotes would result in savings between $2,089 and $3,904, with average expected savings coming out at $2,914.
A household’s actual saving depends on several factors, according to Freddie Mac. These include loan size, to which the total saving will be proportionate, as well as the dispersion of rate offers. Additionally, borrowers who expect to have their mortgage for a longer term, and neither refinance nor move, will gain more from a reduced rate.
