50-year mortgages would backfire on buyers

Housing affordability is a national crisis that U.S. lawmakers and industry leaders have long struggled to solve. But the new proposal from the Trump administration touting 50-year mortgages as a solution to make homeownership more accessible isn't quite what it seems.

Federal Housing Finance Agency (FHFA) Director Bill Pulte heralded the 50-year mortgage plan in an X post over the weekend, calling it a “complete game changer." However, Pulte didn’t give additional details on how the Trump administration would set the plan in motion.

Housing experts say stretching out mortgage repayment to 50 years will strip homeowners’ ability to earn equity and keep them indebted for longer.

More importantly, it ignores housing’s real crisis: a lack of affordable inventory and elevated mortgage rates.

“I’m not even sure there are two sides to this… that’s how backward of a solution this really is to the [affordability] problem,” said Coby Hakalir, vice president of mortgage banking and ancillary services at T3 Sixty, an industry brokerage consulting firm.

“It actually would make the problem worse. It would bottleneck the housing industry. It would put consumers into longer debt with less return on their money, and it would create, basically, people paying rent for their entire lives to be in a home.”

Why the math on a 50-year mortgage doesn’t work

Mortgage professionals say the math on 50-year home loans simply doesn’t math in borrowers’ favor.

That’s because the interest rates on a longer-term loan would be higher to account for the increased risk to the lender who has to back that loan for an additional 20 years, said Melissa Cohn, regional vice president with William Raveis Mortgage.

“When you kick the can (the principal can) down the curb for an additional 20 years, that’s basically paying interest only,” Cohn said.

Plus, it will take much longer for homeowners to build meaningful equity, which enables them to buy and sell homes to keep existing inventory flowing, she added.

It also means borrowers will pay substantially more in interest for longer along with longer-term private mortgage insurance (PMI) costs. PMI is charged when borrowers put down less than 20% on a home.

30-year vs. 50-year mortgage example

Here’s a theoretical example comparing both a 30-year and 50-year loan term at their respective interest rates.

On a $400,000 home with 10% down ($360,000 loan), a 50-year mortgage at 7.24% would cost borrowers $242 more per month than a 30-year loan at 5.99% — $2,398 versus $2,156 in principal and interest.

Over the life of the loan, borrowers would pay $662,640 more in interest with the 50-year option, bringing total costs to $1.44 million compared to $776,160 for the 30-year mortgage. A 30-year-old homebuyer would also carry the debt until age 80 instead of 60.

The higher interest rate on 50-year mortgages — conservatively estimated at 125 basis points above 30-year rates — eliminates any monthly savings from the extended term. Plus, after 10 years, you’d only reduce the principal balance by roughly $10,000 on a 50-year loan versus about $60,000 with a 30-year mortgage — all in exchange for a higher payment, Hakalir said.

Of course, this is all theoretical, because a 50-year mortgage can’t even be purchased on the secondary market by Fannie Mae and Freddie Mac — two government-sponsored enterprises (GSEs) that back most U.S. mortgages.

“While the mortgage lending industry welcomes efforts to make homeownership more affordable and attainable for more Americans, the Qualified Mortgage (QM) rule specifically limits QM protection to loans of 30 years or less," a Mortgage Bankers Association (MBA) spokesman said in a statement.

The spokesman added that lender appetite to offer a 50-year mortgage will likely be "muted" because Fannie Mae and Freddie Mac can't buy non-qualified mortgages. "Investor interest may also be limited given the expected higher prepayment, which will mean higher interest rates for 50-year loans," the spokesman continued. 

"Our concern is that any affordability benefit derived from expanding the mortgage term to 50 years would be offset by increased borrower risk and slower borrower equity growth resulting from the extended amortization period, especially given the expected slowing of home price growth.”

How to meaningfully address housing affordability

The median U.S. household spends roughly 43% of its monthly income on mortgage payments alone, according to Zillow research. The suggested rule of thumb is to keep this share at or below 28%. That’s become increasingly difficult for many Americans as mortgage rates stay stuck at 6% and home prices keep creeping up. As of September, the median existing-home sales price reached $415,200, up 2.1% from a year ago, according to the National Association of Realtors.

To help address sky-high home prices and pent-up buying demand, more inventory is urgently needed — and that requires building more homes.

“Inventory is mainly a local and state-level issue, but the federal government can influence that,” Hakalir said. He added that the federal government can offer incentives to states that can eventually filter down to the local level to entice more development of different kinds of housing types, adding more options to the existing-home stock.

Another action item that Cohn said could help bring down costs: addressing loan-level price adjustments (LLPAs). The FHFA sets LLPAs for conventional loans, which are used by Fannie Mae and Freddie Mac to determine pricing for a mortgage based on borrowers’ loan-to-value ratios and credit scores.

Hakalir agrees.

“The FHFA and Bill Pulte could do that tomorrow; they're choosing not to,” Hakalir said. “And the reason they're choosing not to is because those LLPAs represent income coming into the GSEs, and their ultimate plan is to take the GSEs out of conservatorship and privatize. That income translates into the actual valuation of the GSEs.”

As the industry digests this latest proposal, Hakalir said he’d like the Trump administration — and Pulte, in particular — to “take the role seriously” and “bring real solutions that are meaningful and actionable” that will address the real pain being felt by homebuyers across the country.

“We don't need a 50-year mortgage,” Hakalir emphasized. “We need five or six different things the administration can put into place today, right now, without Congress that could bring down the cost of housing.”