(NEXSTAR) — In addition to suggesting $2,000 tariff checks for Americans over the weekend, the Trump administration suggested it’s working on “a complete game changer:” the 50-year mortgage. Some, however, suggest it may not be as financially beneficial as it seems.
Federal Housing Finance Agency Director Bill Pulte made the announcement on Saturday, and it comes as Americans have sought out assistance with their mortgages, at least according to Google Search data. ARMs, or variable-rate mortgages, have become more common than they were after the 2008 housing crisis.
Mortgages are generally considered good debt to have (though paying one off used to warrant a patriotic plaque). Owning a home and paying a mortgage allows you to build equity, which experts say would slow over the life of a 50-year loan.
On paper, a 50-year mortgage is relatively simple: you would owe a smaller amount each month than on the average 30-year mortgage. But, as Realtor.com points out, you would pay more interest overall on a 50-year loan than on a 30-year loan.
“The slow equity build would make trading up or down very difficult,” Lawrence Yun, chief economist for the National Association of Realtors, explained. “It would also take almost 40 years to pay off half the balance, meaning most borrowers would not begin building meaningful equity until the final decade.”
Let’s say you’re buying a home at $400,000, with 20% down and an interest rate of 6.25% (not far off from the average rate of 6.22%). On a 30-year loan, your monthly payment of just the principal and interest would amount to $1,970, per Fannie Mae’s mortgage calculator. If you increased that to a 50-year loan, your principal and interest would drop to $1,744.
With the 30-year mortgage, you would pay more than $300,000 in interest overall. With the 50-year mortgage, that total would be north of $800,000.
But it’s unclear what the interest rate would be for a 50-year mortgage. Data released by Freddie Mac last week showed the average rate for a 30-year mortgage was 6.22%, while the rate for a 15-year mortgage was 5.5%.
The rate would likely be higher, Matthew Graham, chief operating officer at Mortgage News Daily, told CNBC. Higher interest rates coupled with lower monthly payments, and thereby a low pay-down of the principal early on, could cause “a double whammy for those with any hope of building equity,” he explained.
A 50-year mortgage isn’t a new concept, either.
It traces back to Southern California, according to reports. In 2006, one expert told NBC News that the 50-year mortgage “may be the only way [buyers] can get into a home” because many had debt-to-income ratios that prevented them from qualifying for a 30-year mortgage.
Still, experts nearly 20 years ago pointed to the same drawbacks — slow-building equity, minimal monthly savings, greater interest payments over the life of the loan — that opponents are noting today.
“It will ultimately reward the banks, mortgage lenders, and home builders while people pay far more in interest over time and die before they ever pay off their home,” Rep. Marjorie Taylor Greene (R-Ga.), who has made waves recently while criticizing her own party, wrote on X. “In debt forever, in debt for life!”
She went on to suggest “companies and asset managers” should be stopped from “buying up single family homes.”
The Associated Press contributed to this report.
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