Housing News

Would 50-Year Mortgages Make Buying a Home More Affordable?

President Donald Trump has floated the idea of creating 50-year mortgages to make housing more affordable for homebuyers.

The president posted a meme on social media on Saturday introducing the concept.

Federal Housing Finance Agency Director Bill Pulte followed up quickly on X with a post that 50-year mortgages would be “a complete game changer.” He confirmed on Saturday it was being worked on.

But would a 50-year mortgage make it cheaper to own a home? That depends.

These loans have the potential to lower monthly mortgage payments by spreading out the costs of owning a home over a longer stretch of time. That could help many people break into homeownership. However, the overall cost of the loan would be higher because the borrower is paying interest on the loan for 50 years instead of the traditional 30.

For example, someone who bought a $400,000 home would save more than $250 a month on their monthly mortgage payments by using a 50-year, fixed-rate loan as opposed to a 30-year loan. The yearly savings would be just over $3,000. This assumes they put 10% down when they purchased the home and had a 6.2% interest rate.

The lower payments could help more people qualify for a loan to buy a home. However, they will wind up paying more for their home over the long-term. Mortgage interest rates are typically higher on longer loans.

And homebuyers will pay more in interest as they would be holding the loan for two additional decades compared to a traditional 30-year loan.

Even if mortgage rates were the same, that same buyer would spend about $375,000 more in interest alone over the life of a 50-year loan. In total, that $400,000 home would end up costing nearly $1.17 million, almost three times the original sales price of the home.  

“It gets you in the home, but you pay more for the home,” said Mosi Gatling, senior vice president of strategic growth and expansion at New American Funding. She’s also a Las Vegas-based loan officer. “So much less of [your monthly housing payment] goes to the principal each month.”

Plus, homeowners wouldn’t be building as much equity in their properties. That means they wouldn’t own as much of their homes outright if they chose to sell after a few years. So, it could be harder to sell without losing money when closing costs are totaled up.

It also may make it more difficult to access their home equity through a cash-out refinance, home equity line of credit (HELOC), or home equity loan because they have less equity overall.

It could also be riskier if there is another downturn where home prices come down.

“You’re need some sound strategy around what a possible exit plan could be if you wanted to sell in a short period of time,” said Gatling.

Additionally, there are significant legal obstacles to longer mortgages.

The length of most mortgages is capped at 30 years following federal legislation passed after the financial crisis in the mid-2000s.

Under current laws, Fannie Mae and Freddie Mac (the government-sponsored enterprises that buy most mortgages, which are also overseen by Pulte’s FHFA) are not allowed to support mortgages longer than 30 years. Therefore, unless the laws are changed, any loan with a term of more than 30 years would likely be considered a non-QM loan and would have different rules than Conventional loans.

If 50-year mortgages do eventually become reality, each homebuyer will need to consider whether the benefits of a five-decade loan outweigh the costs, or vice versa.

Mosi Gatling NMLS # 557166