Mixed interest: 50-year mortgage proposal gets cool reception

NEW YORK — The White House says it is considering backing a 50-year mortgage to help alleviate the home affordability crisis in the country.

But the announcement drew immediate criticism from policymakers, social media and economists, who said a 50-year mortgage would do little to resolve other core problems in the housing market, such as a lack of supply and high interest rates.

Bill Pulte, director of the Federal Housing Finance Agency, said on X over the weekend that a 50-year mortgage would be “a complete game changer” for homebuyers. FHFA is the part of the federal government that oversees Fannie Mae and Freddie Mac, which buy and insure the vast majority of mortgages in the country.

Following his initial response, Pulte said the idea was “simply a potential weapon in a WIDE arsenal of solutions that we are developing.”

The 30-year mortgage is a uniquely American financial product and the default way to buy a home since the New Deal. Politicians and policymakers at the time wanted to create a standardized mortgage that borrowers could afford and pay off during their working years, when the average lifespan for an American was 66 years old.

Lower payment

Extending the life of a mortgage to 50 years does decrease a borrower’s monthly payment.

The average selling price of a home in the U.S. was $415,200 in September, according to National Association of Realtors. Assuming a standard 10% down payment and an average interest rate of 6.17%, the monthly payment on a 30-year mortgage would be $2,288 while the payment on a 50-year mortgage would be $2,022. That’s presuming a bank would not require a higher interest rate on a 50-year mortgage, due to the longer duration of the loan.

But significantly higher interest

Because even more of the monthly payment on a 50-year mortgage would go toward interest on the loan, it would take 30 years before a borrower would accumulate $100,000 in equity, not including home price appreciation and the down payment. That’s compared to 12-13 years to accumulate $100,000 in equity when paying off a 30-year mortgage, excluding the down payment.

A borrower would pay, roughly, an additional $389,000 in interest over the life of a 50-year mortgage compared to a 30-year mortgage, according to an AP analysis.

Other analysts came to a similar conclusion.

“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 and significantly slow equity accumulation,” wrote John Lovallo with UBS Securities.

Broader housing issues

A 50-year mortgage does nothing to solve one critical issue when it comes to housing affordability — the lack of supply of homes. States like California and cities like New York have recently passed legislation or made regulatory changes to allow builders to build homes faster with less regulatory red tape.

There’s also the raw cost of homebuilding in the country. Products such as steel, lumber, concrete, copper and plastics that go into home construction are now subject to tariffs.

The average age of a first-time homebuyer has been creeping up for years and is now roughly 40 years of age. A 50-year mortgage would be difficult to underwrite for a bank for a 40-year-old first-time homebuyer, who would be 90 years old by the time that home is paid off.

The average life expectancy of an American is now roughly 79 years, meaning there’s 11 years of life expectancy not covered in a 50-year loan.

“It’s typically not a goal of policymakers to pass on mortgage debt to a borrowers’ children,” said Mike Konczal, senior director of policy and research at the Economic Security Project..