The Hidden Dangers of the 50 Year Mortgage

Proposed 50-yr. Mortgage Loans

Potential Implications + Purchase Scenario 


Overview

There is a discussion underway about offering 50-yr. fixed mortages in the U.S. President trump posted a social media graphic juxtaposing himself with Franklin D. Roosevelt, noting “30-yr. mortgage” under FDR’s photo, and “50 year mortgage” under the picture of himself. The Federal housing finance agency (FHFA) director confirmed that the administration is working on a 50-yr. mortgage, and said on social media that it would be “a game changer”. The stated objective is to improve housing affordability by reducing monthly payments, so that more buyers (especially younger/first-time-homebuyers can qualify. Currently mortgages over 30 years are not considered as a “qualifying mortgage”, therefore legislation would be required to make the change. 


My Concerns

1. Equity buildup: it would take much longer to pay down the principle of the loan, so equity would grow much more slowly. This means sellers have less equity and may choose to stay in-place longer. 
   
   
2. Higher total interest paid: even though the monthly payment is lower, over the long term, you would pay much, more in total interest. 
   
   
3. Housing market: lower payments should stimulate more demand, which in-turn will push prices up even further. In Vermont, we are already dealing with high home prices (especially in Chitt co), so that would ultimately only worsens our affordability issues. 
   
   

Purchase Scenario

$450,000 purchase price with 20% down ($360,000 loan) at 6.2% interest


Payment:

• 30-year mortgage: $2,205/month (principal & interest only)
  
  
• 50-year mortgage: $1,948/month (principal & interest only)
  
  

*That’s a difference of $257/month lower on the 50-year term.


Amount paid toward principle per payment:

• 30-yr. - $345
  
  
• 50-yr. -  $88
  
  

Total payed on mortgage:

• 30-year mortgage:
  
  
• Total paid (principal + interest): $793,760
  
  
• Total interest paid: $433,760
  
  
• 50-year mortgage:
  
  
• Total paid (principal + interest): $1,169,090
  
  
• Total interest paid: $809,090
  
  

*The 50-year term saves $257/month, but costs roughly $375,000 more in interest over time— nearly double the cost of borrowing.



11 year equity position (average length of homeownership in U.S.):

• 30-year mortgage:
  
  
• Equity: $155,041 (about 34% of the home’s value)
  
  
• 50-year mortgage:
  
  
• Equity: $106,686 (about 24% of the home’s value)
  
  

*After the typical 11-year tenure, the homeowner with a 50-year loan would have roughly $48,000 less equity than the 30-year borrower, even though they’ve both made payments for the same amount of time.


Recap

• $257/mo lower payment for 50-yr. mortgage
  
  
• Only 4.5% of payment goes toward principle on 50-yr. loan (vs 15.5%)
  
  
• 50-yr. mortgage nearly doubles the cost of borrowing (total interest paid)
  
  
• 10% less equity after 11 years of home ownership 
  
  

Takeaways:

• The 50-year loan lowers monthly payment modestly but massively increases total interest.
  
  
• Equity builds much more slowly, leaving homeowners with less ownership stake after typical tenure.
  
  
• Housing affordability improves on paper (more buyers can qualify), but total wealth creation declines.
  
  
• If widely adopted, 50-year loans could boost demand and prices, not necessarily affordability.
  
  

*Lower payments don't equal lower prices— they enable higher prices. This is not a discussion about affordability, its a discussion about credit expansion