50-Year Mortgage – Part 1

Do you think you’d like a 50-year mortgage?

The Trump administration recently floated the controversial idea of a 50-year mortgage. A quick calculation using current interest rates indicates that the total cost of a $400,000 home would rise to nearly a million dollars with that kind of mortgage. Now, let’s look at the reasons for the proposal first, then the pros and cons.

Realtor.com reports that the average age of first-time home buyers reached 40 years old last year. An analysis conducted by Zillow shows that since 2018, there’s been a significant increase in couples choosing house funds for their wedding gift registries. America’s current housing finance laws would need to change for government backing of a 50-year mortgage. It’s questionable whether lenders would offer a reasonable fixed interest rate for such a long term. Though risky, private lenders could create 50-year non-qualified mortgage loans by charging higher interest rates. This could potentially help open up the first-time home buyer market. It’s assumed that a 50-year mortgage would make homeowning more accessible, especially for first-time buyers. Monthly payments would be lower, and refinancing in the future would be an option.

Some say that more home buyers could lead to economic growth, but the negatives are potentially higher interest rates and total interest costs, as well as slower equity growth, making it difficult to sell or refinance. Plus, the potential for higher home prices. Since I’m not a proponent of longer mortgages, I’m out.

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