It shows that if you don't compare rates and shop around, you could easily wind up paying tens of thousands of dollars in extra interest, depending on where you live.

"In other words, it pays to do your research," writes Tendayi Kapfidze, LendingTree's chief economist.

Mortgage rates can vary widely from lender to lender

man wearing a suit sitting in a table showing a mortgage loan contract and where the signer must sign
nito / Shutterstock
Different lenders can offer vastly different rates.

The study found that in many parts of the country, it's common for mortgage rates to differ by around one full percentage point from one lender to the next.

This is what we mean: Bank XYZ might offer you a 30-year fixed-rate mortgage at 4.45%, but Bank ABC would give you a loan at just 3.5%.

In some markets — including Las Vegas, Milwaukee and Virginia Beach, Virginia — rates for homebuyers typically vary by more than a full point between lenders.

Those kinds of differences translate to real money. When you're purchasing a home, not taking the very first mortgage rate offered to you can save you an average $125 a month, or about $1,499 a year. If you're refinancing, you can save around $163 a month, or $1,953 a year, LendingTree says.

See for yourself by compare mortgage rates where you live.

Shopping around can save a homebuyer up to $66K

San Francisco skyline and Bay Bridge at sunset, California
IM_photo / Shutterstock
Savings for homeowners are greatest in San Francisco.

In many places, comparison shopping can mean serious savings, the study shows.

Homebuyers throughout the 50 largest cities in the U.S. will save an average $44,500 over the life of their mortgage if they shop around for the best rate, according to the research.

And the savings are even more substantial in these markets.

The best cities for homebuyers who compare mortgage rates
City Average monthly savings Average annual savings Lifetime interest savings
1. San Francisco $186 $2,228 $66,163
2. Fresno, California $172 $2,068 $61,428
3. Los Angeles $168 $2,014 $59,810
4. Portland Oregon $167 $2,001 $59,425
5. Washington, D.C. $166 $1,995 $59,263
6. Las Vegas $163 $1,954 $58,024
7. Seattle $160 $1,920 $57,041
8. Boston $157 $1,884 $55,951
9. Minneapolis $154 $1,845 $54,797
10. Phoenix $145 $1,737 $51,606
11. Cincinnati $144 $1,724 $51,193
12. New York $143 $1,717 $50,999
13. Kansas City, Missouri $142 $1,710 $50,782
14. Sacramento, California $142 $1,708 $50,738
15. Virginia Beach, Virginia $142 $1,707 $50,704

Source: LendingTree. Potential savings are based on median loan amount and mortgage rate spreads in each city.

A homeowner who shops around could save $80K on a refi

Falling mortgage rates have had homeowners overwhelming lenders with refinance applications, which are at their highest level since June 2013 and have been pouring in at triple the rate of a year ago, the Mortgage Bankers Association says.

When an owner comparison shops for a refinance loan, the savings can be even greater than what buyers get, the study shows.

The best cities for homeowners who compare refi rates
City Average monthly savings Average annual savings Lifetime interest savings
1. San Francisco $225 $2,700 $80,211
2. San Diego $218 $2,617 $77,740
3. Los Angeles $207 $2,489 $73,954
4. Sacramento, California $200 $2,397 $71,206
5. Seattle $187 $2,241 $66,592
6. Boston $180 $2,158 $64,113
7. Denver $176 $2,111 $62,712
8. Washington, D.C. $175 $2,105 $62,528
9. New York $173 $2,079 $61,769
10. Portland, Oregon $172 $2,064 $61,317
11. Oklahoma City $172 $2,063 $61,294
12. Atlanta $171 $2,055 $61,044
13. Fresno, California $171 $2,051 $60,919
14. Minneapolis $171 $2,048 $60,853
15. Hartford, Connecticut $171 $2,048 $60,844

Source: LendingTree. Potential savings are based on median loan amount and mortgage rate spreads in each city.

Low mortgage rates are no excuse for not shopping around

Happy couple signing mortgage loan with lender.
fizkes / Shutterstock
Most people apply for a mortgage with just one lender.

Many people need to get the message about comparison shopping for mortgages. Studies have shown that about 30% of borrowers never shop around before taking out a home loan, and more than three-quarters apply for a mortgage with only one lender, according to the U.S. Consumer Financial Protection Bureau.

It might be very tempting not to bother comparing mortgage rates at a time when headlines are telling you rates are low.

Thirty-year fixed-rate mortgages are currently averaging 3.47% — nearly a three-year low and not far from the record low of 3.31%, according to mortgage Freddie Mac, which has been tracking rates for nearly 50 years.

Rates could continue to fall if the uncertainty over the coronavirus causes investors to keep buying up Treasury bonds as a safe investment. The demand is pushing down bond yields, and mortgage rates are going along for the ride.

Kapfidze, the LendingTree chief economist, says his study demonstrates that no matter how low mortgage rates go, you should always comparison shop for a home loan.

"As interest rates change, so do the savings you could reap from shopping around for a mortgage lender," he says.

Take a look at today's best mortgage rates where you live.

About the Author

Doug Whiteman

Doug Whiteman

Editor-in-Chief

Doug Whiteman is the editor-in-chief of MoneyWise. He has been quoted by The Wall Street Journal, USA Today and CNBC.com and has been interviewed on Fox Business, CBS Radio and the syndicated TV show "First Business."

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