A new study has revealed that most home buyers in the United States are paying more in mortgage fees than necessary, creating a market of excess charges worth more than $13 billion a year. While many borrowers focus on securing a reasonable interest rate, researchers found that the real savings often lie in the fees that accompany the loan, which vary widely from one lender to another and are easily overlooked. According to the study, comparing offers can significantly reduce both upfront costs and long-term interest payments, suggesting that most buyers could avoid overpaying with only a small amount of extra effort.

The research was conducted by Cheng “Cathy” Zhang, a postdoctoral associate at the Warrington College of Business at the University of Florida. Zhang examined newly available data from the Consumer Financial Protection Bureau, which in 2018 began requiring lenders to report total mortgage costs, including fees that had previously been difficult to compare. Her analysis found that shopping for a loan typically saves borrowers an average of $32 in fees and more than $1,000 in interest over the life of their mortgage. While that may sound modest for a single household, multiplied across millions of loans each year, it reveals a massive pattern of preventable overspending.

Zhang argues that borrowers often underestimate how much control they actually have over what they pay. She explains that lenders will raise fees when they can, particularly when dealing with consumers who lack experience or knowledge about mortgage pricing. To counter this, buyers can take several steps: obtain quotes from multiple lenders, use a mortgage broker who may negotiate better terms, or consider simplified mortgage products such as zero-fee loans. These loans roll administrative charges into the interest rate, and Zhang’s analysis suggests that they can sometimes save borrowers money overall, contradicting the assumption that avoiding upfront fees always means paying more in the long run.

Despite the availability of online tools that make comparison easy, many prospective buyers remain unaware that charges differ significantly between lenders. This lack of awareness leaves them vulnerable to overpaying. Zhang says many borrowers accept their first offer simply because they do not realise that even a quick search might yield better terms. In her view, the problem is not unwillingness, but unfamiliarity with how flexible mortgage pricing can be.

The study also found that not everyone is equally likely to overpay. More experienced buyers, wealthier households and people with higher levels of education tend to shop around more and therefore secure better deals. By contrast, first-time buyers and lower-income borrowers are far more likely to pay inflated fees, deepening financial inequalities that already affect access to housing. Zhang concludes that although lenders may benefit when consumers lack knowledge, the imbalance can be remedied. A few simple steps — especially comparing offers — remain the most effective defence against unnecessary mortgage costs.

More information: Cathy Cheng Zhang, Do U.S. Borrowers Overpay Mortgage Fees?, The Journal of Real Estate Finance and Economics. DOI: 10.1007/s11146-025-10039-2

Journal information: The Journal of Real Estate Finance and Economics Provided by University of Florida