What you pay for a mortgage can differ widely depending on where you live, according to new research analyzing mortgage interest rates and fees by state.

The average interest rate was 5.04% in 2018, but those rates ranged from 4.24% in Hawaii to 7.71% in Maine. Close behind were West Virginia (7.39%) and Ohio (7.07%), according to the new study, conducted by researchers at Clever Real Estate.

Obviously, interest rates dramatically impact the cost of owning a home. A new homeowner in Maine who purchased a $183,900 home in 2018 would end up paying nearly $290,000 just in interest during the life of a 30-year mortgage with a 7.71% interest rate, according to the study.

As a result, the average Maine home buyer, who earns $110,000 annually, could be spending 14% of their income on their mortgage payments each month.

The same loan in Hawaii would accrue $150,000 less interest at the state’s average 4.24% rate in 2018, the study reported

“A lower mortgage rate, say closer to the national average of 5%, would drop that mortgage-to-income ratio to less than 10%,” said researcher Francesca Ortegren in the study.

So what drives these wide variations in mortgage rates? The local economy, foreclosure rates and the presence of lender competition all impact rates, Ortegren said.

Foreclosure rates are a drain on lenders, so lending institutions tend to bump up interest rates in areas where foreclosures are more common. Ohio homes were foreclosed on at a rate of 0.63%—1.3 times that of the national average. Hawaii, on the other hand, had a foreclosure rate of 0.28% and much lower interest rates.

Meanwhile, if there is a high density of lenders in one area, they might be driven to lower their rates in order to undercut the competition. But in places like West Virginia, the lack of competition appears to lead to inflated rates, Ortegren reported.

Fees Vary

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