Is Now the Time for 50-Year Mortgages?

While the idea of a 50-year mortgage may sound bizarre, it’s being suggested as a potential way to ease the financial pressures many buyers face in today’s housing market. But, does the longer mortgage period make sense?

The Upside: Why Some May Like It

By extending the repayment period well beyond a traditional 30-year loan, supporters of a 50-year mortgage argue it could make monthly payments more manageable and open the door to homeownership for more Americans.

• Lower monthly payments: This is the big-ticket item. With a 50-year mortgage, the monthly payment on a home will decrease. That might make a house more affordable month to month, especially for first-time home buyers.
  
  
• Easier qualification: Because payments are lower, people who would normally face challenges in qualifying for a traditional mortgage could have a better chance.
  
  
• Flexibility: This may expand options for buyers planning to move or refinance in the near term. With lower monthly payments, they may be able to purchase a home sooner and refinance when conditions improve.

The Downside: Why it’s Risky for Many

• Total interest: Spreading payments over 50 years means paying a lot more interest over the life of the loan. For instance, with a 30-year $500,000 mortgage at 6.5% the homeowner will pay roughly $660,000 in interest alone. The same scenario with a 50-year mortgage and the amount of interest to be paid jumps up to a staggering $1,225,000 – almost three times the original purchase price!
  
  
• Slower equity buildup: Since a larger portion of each payment goes toward interest, homeowners accumulate equity at a slower rate. Using the figures above, a borrower would gain about $76,000 in equity over 10 years with a 30-year mortgage. However, with a 50-year mortgage, the equity built would be approximately $18,500 over the same period.
  
  
• Lasting Debt: With a 50-year mortgage, many people could still be making payments well into their retirement years!

How Could This Affect Rates Going Forward?

A 50-year mortgage could influence rates in a few ways. Because the loan stretches over a much longer period, lenders may charge slightly higher interest to account for the added uncertainty over time. This uncertainty includes factors such as inflation, shifts in the economy, and the borrower’s long-term ability to repay.

Likewise, investors who buy mortgage-backed securities may demand a higher return for committing capital for such a long period. This could also increase rates compared to a standard 30-year loan.

If 50-year mortgages are rolled out, time will tell if they are widely adopted. In general, though, one would expect them to come with somewhat higher rates simply because of their longer duration.

The Root Issue

Stepping back from the 50-year mortgage debate, the actual loan term isn’t necessarily the biggest issue Americans are facing today. The root issue lies within the affordability and availability of homes.

Estimates vary, but most analysts say that the U.S. is short a few million homes. This is the result of underbuilding, relative to population and demand growth. With too few homes available, prices and rent have risen far faster than income. This has left many young, first-time home buyers squeezed out of the market.

Supporters of a longer-term mortgage argue that it could help buyers manage today’s higher costs and make homeownership more attainable. Others note that it may have a limited impact without broader efforts to increase the number of homes available.

In practice, the 50-year mortgage would likely become one of several policy ideas aimed at addressing affordability, working alongside rather than replacing other longer-term strategies.

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