In the United States, the common mortgage term for first-time homeowners is typically 30 years.
Last year, the Trump administration introduced a proposal to extend this term by an additional 20 years, making it a 50-year mortgage. The intent behind this idea was to reduce monthly payments for homeowners.
Despite the potential for lower monthly payments, recent analyses have highlighted the long-term financial impact of such a proposal, which may not be as beneficial as it initially seems.
Kevin Hassett, then director of Trump’s National Economic Council, explained to Fox News that this change would “reduce the monthly payment quite a bit for a typical home for middle America by a few hundred dollars a month,” emphasizing the need to help people re-enter the housing market.
President Trump also addressed the proposal on Fox News’ The Ingraham Angle, saying, “All it means is you pay less per month. You pay it over a longer period of time. It’s not like a big factor. It might help a little bit.”
Experts have raised concerns, noting that extending a mortgage term means a longer duration of making payments, with minimal monthly savings.
According to an analysis by Axios, a $500,000 loan at an interest rate of 6.22 percent would require an adjusted interest rate of 6.94% for a 50-year term. The monthly payment would be $2,985, which is only $83 less than the monthly payment for a 30-year term.
In the initial decades of a 50-year loan, most payments would go towards interest. For a 30-year loan, over $30,000 would be paid off after five years, whereas a 50-year loan would see only around $6,000 paid off, leaving over $380,000 still owed after 30 years.
The idea of a 50-year mortgage has been met with skepticism on social media. One user on Reddit commented, “Save 10% a month, make 67% more payments!” Another noted, “The funniest part of a 50 year mortgage is that you might save 10% on your monthly payments, but you have to make those payments for 20 more years.” A third user remarked, “Crazy, the difference in total interest is literally equal to the full principal.”
Recently, Federal Housing Director Bill Pulte indicated that the Trump administration might be reconsidering the 50-year mortgage proposal. As reported by POLITICO, he mentioned to reporters at the White House, “I think we have other priorities.”