In an attempt to boost affordability, President Donald Trump proposed a 50-year mortgage on Truth Social, and Federal Housing Finance Agency director Bill Pulte confirmed that a 50-year mortgage is a potential weapon in a wide arsenal of solutions that they are developing.
What Could It Mean
The motivation behind the product would be to get younger buyers off the sidelines—and lower monthly payments. Yet, longer terms could mean higher-than-average interest rates and a substantial reduction in the equity homeowners could gain.
Additionally, the potential product will have to navigate legalities set in place from the Dodd-Frank Wall Street Consumer Protect Act, which includes the Qualified Mortgage rule. The rule does not currently include a 40- or 50-year mortgage.
What They’re Saying
Ali Wolf, chief economist at Zonda: “We’re fully supportive of the administration’s efforts to explore solutions that improve housing affordability. There’s a generation of potential homeowners who have been locked out of the market due to rising costs.
While expanding mortgage options like a 50-year loan could help more people qualify, the long-term tradeoffs, such as minimal monthly payment savings, higher expected interest rate on the loans, slower equity building, and extended debt into retirement, mean it may not be the ideal solution. We encourage continued innovation to make homeownership attainable without increasing financial strain over time.”
Nicollette Chapman, senior vice president of national mortgage data solutions at Zonda: “Using an example of a $450,000 loan at 6.25%, the breakdown between a 30- and 50-year mortgage would look like the following:
30-year mortgage:
P&I Payment: $2,771/mo
Total Interest Paid: $547,436
50-year mortgage:
P&I Payment: $2,454/mo
Total Interest Paid: $912,666
The monthly cost savings with the 50-year mortgage is $317, but the cost of borrowing that money over an additional 20 years is over $365,000.
The other potential issue I see here is the slow growth of equity. Dependent on the state of the market and rate of appreciation, the 50-year mortgage holder could still be underwater on their home, potentially causing a ripple effect in value when short selling/defaulting could be the only option.”
Kate Wood, lending expert at NerdWallet: “A longer loan term doesn’t make sense for borrowers or for lenders.
Borrowers might be able to pay less monthly principal and interest, since the loan would be spread out over half a century. But the total interest paid over the life of the loan would be staggering, since even with a low rate, you’re looking at 50 years’ worth of interest. Paying down the loan over so much time could also mean building equity at an incredibly slow pace.
For mortgage lenders, these would be riskier loans. There’s a reason why as loan terms go up, you’ll see average mortgage rates rise as well. Lending to a borrower for a 10- or 15-year loan is less risky than a 30-year mortgage, even if you’re looking at an identical borrower, simply because the lender’s getting its money back that much more quickly.
With a 50-year loan, you’re asking the lender to have an awful lot of confidence in the borrower. Even a strong borrower would likely be quoted an interest rate well above what they’d be offered for a 30-year, and borrowers with weaker finances—who’d theoretically benefit the most from a more affordable monthly payment—would be saddled with even higher rates.
It’s also vital to recognize that principal and interest aren’t the only costs of homeownership. Rising property taxes and homeowners insurance premiums threaten affordability for current homeowners as well as prospective buyers.”
Jeff Bode, CEO at Click n’ Close: “While the idea of a 50-year mortgage might sound like a way to improve affordability on the surface, its practical benefits are questionable. Acceptance in the secondary market would likely require a higher interest rate, which would offset much of the advantage of the longer term. In many ways, this feels reminiscent of the pay-option ARM era, a product that seemed innovative at the time but ultimately created more risk than value for consumers.”
Dan Peña, president of partnership lending at loanDepot: “The 50-year mortgage could be a useful tool to help with affordability and allow more first-time buyers to enter the market, but it’s not a game changer. While it would lower monthly payments by stretching out the amortization period, longer-term loans typically carry higher interest rates due to increased risk, so the benefits will ultimately depend on where rates land. It’s also important to note that the tradeoff for borrowers would be paying more interest over time and building equity more slowly than with a 30-year loan.
For home builders, it’s another tool that could support demand at the entry level if it helps more buyers qualify. Anything that improves affordability is a positive as it could expand the pool of potential buyers and help builders move inventory, particularly in markets where affordability has been a constraint.”
