Millions of Homeowners Are Overpaying $3,300 a Year on Their Mortgage - Are You One?

Owning a house is frequently seen as one of the signs of financial success, but a mortgage might be costing some homeowners more than it should. A Bankrate study released in June 2026 found a "hidden homeownership tax" in which 87% of American borrowers overpaid for their mortgages as of 2025. That hidden tax cost homeowners over $3,300 annually, but Bankrate stressed that the problem is solvable.

If you have a mortgage or are thinking about buying a home, learning about this hidden overpayment could help you save year after year.

What's causing homeowners to overpay on their mortgage

The study explores "overpayment," which it defines as "how much a borrower's actual interest rate exceeded the competitive market." According to the study, the frequent overpayment occurred not because better rates weren't available, but because most borrowers never found those better rates. The issue isn't credit scores or bad luck. It's that borrowers don't find and secure better rates before taking out a mortgage.

The study reports that the problem could have been solved if borrowers used Bankrate's mortgage auction; through the auction, lenders "compete in real time on price alone."

"When lenders compete for a borrower's business, the savings are meaningful and immediate: $279 a month on average, an amount that puts homeownership out of reach for many borrowers," said Bankrate CEO Matt Fellowes, the primary author of the study.

The scale of the mortgage overpayment issue

According to study data, borrowers paid approximately $65 billion in excess interest each year across mortgages that have originated since 2022. The overpayment averages $3,343 per household, per year. The data indicates that a typical borrower may pay $78,186 extra in interest over the life of a 30-year mortgage, which is more than the total retirement savings of a median American household.

The problem is prevalent among refinance borrowers, too; the study found that refinance borrowers are likely to overpay 79% of the time, losing $2,462 annually.

Buyers who are most likely to overpay for their mortgage

The overpayment problem affects certain types of buyers more than others. As of 2025, conventional borrowers overpaid 89% of the time, which was higher than Federal Housing Administration borrowers' 83% overpayment and Veterans Administration borrowers' 81% overpayment. Conventional borrowers were the most creditworthy group in the study, but their lifetime overpayments were equivalent to 23% of their loan balance.

Wealth may also have an effect on the likelihood of a borrower overpaying. While 82% of low-income borrowers overpaid, 90% of higher-middle-income households earning $100,000 to $200,000 annually overpaid as of 2025. Higher-middle-income borrowers also had the highest overpayment share out of any income group and overpaid approximately 23% of their total loan balance over 30 years.

Bankrate's study methodology

In performing the study, Bankrate compared mortgage originations between 2022 and 2025 against offers lenders made on Bankrate's mortgage marketplace. Since the offers submitted through Bankrate's platform are binding and the winning lender honors them, the bids were comparable to the loan origination terms.

The study factored in 17 criteria affecting mortgage rate, such as down payment size, loan size, debt levels, and loan type. Bankrate used public housing data from Freddie Mac and Ginnie Mae to estimate FICO scores based on typical buyer profiles.

Strategies to avoid overpaying for a mortgage

Take the time to shop around and compare mortgage options to ensure you're getting the best deal. The Consumer Financial Protection Bureau (CFPB) recommends contacting each lender you're considering and requesting a loan estimate. Lenders are required to submit a loan estimate within three business days, and you may use these estimates to compare key information about your mortgage.

When comparing the estimates, compare the interest rates carefully. Even a small, 0.25% difference in your interest rate could add up to significant savings over the life of your loan. This is also the time to look for potentially risky features, like a prepayment penalty, that could add to your costs.

How to shop around for a mortgage without damaging your credit score

According to the CFPB, multiple credit checks from mortgage lenders that occur within a 45-day window are recorded as a single inquiry on your credit report. If you shop around to multiple lenders during that 45-day timeframe, the impact on your credit report would be the same as if you got a quote from a single lender.

How to negotiate your closing costs

Certain parts of your closing costs may be negotiable, and you may ask your lender to reduce or waive those costs. If you have estimates from multiple lenders, you may identify any costs that seem high compared to your other estimates and try to negotiate them down. You might see a reduction in your overall closing costs.

You may also ask the seller to contribute to the closing costs. Sellers may be more likely to contribute to closing costs in a buyer's market or if their home has been on the market for a while.

Bottom line

If you think you've overpaid for your mortgage, refinancing may be an option to help you secure a better interest rate. However, mortgage rates are rising again, so do some research before you refinance; if interest rates are higher than they were when you initially took out your mortgage, you may need to wait for them to fall again before you're able to refinance for a lower rate. Don't forget to factor closing costs into your decision to refinance, too.

Taking out a mortgage is a major financial decision, so take time to shop around and make sure that you're getting the best rate. Doing plenty of research and preparation may help ensure you're ready to start investing in a home of your own.

This article is for informational purposes only and should not be considered investment advice.

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