Black homeowners in the U.S. are paying thousands of dollars more for mortgage payments than their white counterparts, according to a new study.
The report, co-authored by MIT Golub Center for Finance and Policy executive director Ed Golding, found that Black borrowers pay $13,464 more over the life of a home loan, with higher interest payments, mortgage premiums and property taxes. In all, these differences amount to a loss of $67,320 in retirement savings for black homeowners.
Bloomberg News first reported the study.
The study, which draws on data from the American Housing Survey and the Home Mortgage Disclosure Act (HMDA), shows how disparities in mortgages have led to stark financial inequalities between white and black Americans.
It also shows that while mortgage rates are at record lows, a large swath of borrowers are being left out from this opportunity.
For one, Black homeowners pay about $250 more per year in interest charges for home purchase loans, with their average interest rate about 12 basis points higher than it is for white homeowners, according to the study. Higher interest rates could be a result of guidance imposed after the great recession by Fannie Mae and Freddie Mac’s regulator, the Federal Housing Finance Agency. This led to lenders charging higher fees to borrowers with lower credit, the authors said in the report.
Black homeowners also have fewer options to refinance their mortgages and are more likely to be turned down for refinancing requests. As a result, Black homeowners pay about $475 per year more than white homeowners, according to the study.
When it comes to insurance, Black homeowners pay an average of $550 more per year than white homeowners, resulting in a loss of $23,000 in retirement savings. Black homeowners also pay more in property taxes than white homeowners, with property taxes 13 percent higher than white homeowners in the same area, according to the study.
The study states that if these extra mortgage costs were eliminated the $130,000 wealth gap between Black and white Americans at retirement would drop by half.
The study comes amid a boom in mortgage originations and refinancings, with millions of Americans seeking to take advantage of 30-year fixed mortgage rates below 3 percent.
But at the same time, some banks like JP Morgan have raised their borrowing standards on getting a loan, making it more difficult to get lower-income Americans to obtain mortgages. Similar measures have been taken by Ginnie Mae, which guarantees loans predominantly for lower-income borrowers and first-time homebuyers.