President Trump has floated the idea of 50-year mortgages — a bold, if controversial, attempt to make homebuying more affordable while the median age of buyers skyrockets and mortgage demand remains low.
Details remain hazy, but Bill Pulte, director of the Federal Housing Finance Agency, said over the weekend the administration is “working on” the proposal, which he called a “complete game changer.”
Such a long mortgage — a good two decades longer than the popular 30-year fixed mortgage — could help lower-income consumers get their own homes, said Erica Sandberg, consumer finance expert at BadCredit.org.
On the other hand, they’ll probably accumulate less equity and end up paying way more in interest, she told The Post.
On Fox News on Monday night, Laura Ingraham told Trump the policy “enraged your MAGA friends,” with significant backlash from allies who “called it a giveaway to the banks and simply prolonging the time it would take for Americans to own a home outright.”
Trump shrugged off the criticism, saying a jump to 50 years is “not even a big deal.”
A five-decade mortgage would likely lower monthly payments for homeowners, according to Sandberg.
For example, the monthly payment for a $400,000 home with $80,000 down and a 5.98% APR is $2,293 for homeowners on a 30-year mortgage, she said. That drops to $2,055 on a 50-year mortgage.
“If that monthly payment is the only thing that is stopping you from home ownership, go for it. You can change it later,” Sandberg urged.
Take, for example, someone who is in the process of purchasing a home and also making installments on a car loan that they know will be paid off in one year.
“Well, then, you can refinance it later when that car is paid and you’re in a different financial situation,” Sandberg said.
But there appear to be several considerable drawbacks to such a long mortgage period.
A higher chunk of the monthly payment will go toward interest on the loan – which means it will take homeowners longer to build up equity.
It would take 30 years before a borrower on a 50-year mortgage accumulates $100,000 in equity, not including home price appreciation and the down payment – compared to roughly 12 or 13 years to build up the same amount on a 30-year mortgage, the Associated Press noted.
A borrower would pay an additional $398,000 in interest over the life of a 50-year mortgage compared to a 30-year mortgage, according to an AP analysis.
“Extending a mortgage from 30 years to 50 years could double the dollar amount of interest paid by the homebuyer on a median priced home over the life of the loan,” UBS Group AG analysts warned in a note.
Members of the MAGA faithful said banks stand to benefit the most.
Fifty-year mortgages “will ultimately reward the banks, mortgage lenders and homebuilders while people pay far more in interest over time and die before they ever pay off their home,” Rep. Marjorie Taylor Greene, the Georgia Republican, wrote Saturday on X.
“We are studying a wide variety of options to reverse the damage [former President Joe] Biden did to the housing market these last four years,” a US Federal Housing spokesman told The Post in a Tuesday statement.
It’s unclear if the government will be able to back loans for 50-year mortgages, since they do not currently meet the definition of a qualified mortgage under the Dodd-Frank Act.
While regulators have the ability to change those requirements, doing so could take a long time since congressional approval is needed.
It is also unclear how this plan would coincide with the Trump administration’s proposal to take Fannie Mae and Freddie Mac private, with an IPO planned sometime in the near future.
Home prices have soared more than 50% in five years after super-low interest rates during the COVID pandemic caused a run on housing – and sales and mortgage demand have since plummeted.
Lack of housing stock is another challenge. Trump has been pushing builders to construct more homes to lower costs, but they say high costs for labor and materials are to blame for the slow pace of new housing.
States including California and New York recently passed legislation or tweaked regulations to make it easier for builders to create homes faster.
But the median age for all US homebuyers is 59, while the median age for first-time buyers is 40 – both all-time highs, according to the National Association of Realtors’ annual survey.
That could make it even harder for homebuyers to take out 50-year mortgages, Sandberg said.
“They’re gonna be having that mortgage deep into retirement. If their income declines in retirement, they could find themselves in a really difficult position … even passing it onto a child,” she said.
