President Trump has floated the idea of a 50-year mortgage to make homeownership more affordable for Americans, but whether such a loan would actually be affordable depends on how you look at it.
A 50-year mortgage would have a nominally lower monthly bill, usually around a few hundred dollars cheaper depending on the loan amount and the rate. So on a month-to-month basis, it might be slightly cheaper than a 30-year mortgage.
But in the long run, 50-year mortgages mean significantly higher interest and a much longer time to accumulate equity.
Are 50-year Mortgages a Thing?
No, not yet.
Let’s be clear: This is just a proposal. If you contact one of our expert loan officers today, you won’t be able to get a 50-year mortgage.
Trump proposed 50-year mortgages in November as his administration looks to tackle the nation’s housing affordability crisis.
It’s just one of several proposals Trump has put forward to boost homeownership: He more recently proposed banning institutional investors from purchasing more single-family homes, and floated the idea of letting people use 401(k) funds penalty-free for housing down payments.
Would a 50-year Mortgage Be Affordable?
You can use our calculator below to test what a 50-year mortgage would mean in different scenarios, but here’s the bottom line: Those loans would be cheaper month-to-month than current alternatives, but their bill would add up in the long run.
A monthly mortgage payment includes both principal and interest. When you pay down the principal, you gain ownership of the home in the form of equity. Interest doesn’t get you anything.
You can look at current mortgages as an example of this: In a 15-year mortgage, you accumulate equity much faster than in a 30-year mortgage and pay less overall interest over the life of the loan.
Equity is important in multiple ways. If you decide to sell your home, your equity is the amount you would walk away with. You can also use equity in the form of a second mortgage like a home equity loan or a HELOC.
In a 50-year mortgage, it would take significantly longer for you to start accumulating equity.
Let’s put it this way: During a fixed-rate mortgage, there is a point in your monthly payments when principal overtakes interest. That means most of your payment starts going toward principal, and you’re accumulating more equity than you’re paying toward interest every month.
Here’s how that shakes out for different loan types. Let’s assume a $400,000 loan with a rate of 6.5% and 5% down for this scenario.
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For a 15-year mortgage, principal and interest switches just 4.4 years in. You’ll be paying more interest than principal for 53 months.
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For a 30-year mortgage, the switch occurs 19.4 years in, or 233 months. That’s already more than four times the time it takes for a 15-year mortgage.
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And for a 50-year mortgage, the switch occurs 39.4 years in. Most of your payments would be going toward interest for almost four decades.
We can take another perspective on that and look at how much equity you’ve accumulated after 10 years for each loan type in that same scenario. Keep in mind that these figures don’t include appreciation.
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For a 15-year mortgage, you’d have $230,820 in equity.
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For a 30-year mortgage, you’d have $77,851 in equity.
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And for a 50-year mortgage, you’d have $34,111 in equity.
The housing market also plays a role in your equity in the form of appreciation. This is separate from your mortgage and reflects macro trends across the local and national economies. Housing prices have generally been on the rise across the country in recent years, and if that trend continues you would also accumulate equity in the long run.
But housing appreciation isn’t guaranteed. If your home value falls, you’ll lose equity.
When Would a 50-year Mortgage Work?
A 50-year mortgage could be a useful financial tool.
There’s generally nothing stopping you from paying more on your mortgage every month. Many homebuyers currently opt for a 30-year mortgage and then treat it as if it were a 15-year payment to have a monthly cushion.
The same could apply for a 50-year mortgage. It could work as a payment floor while you pay more toward your monthly loan. That way if your circumstances change, you have some leeway on payments.
The Bottom Line
A 50-year mortgage is only a proposal right now. That long-term loan would mean lower monthly payments, but that comes at a significant cost. You’d pay much more in interest compared to 15- or 30-year loans, and it would take far longer to accumulate equity in a home. Home appreciation can also help you accumulate equity, but it isn’t guaranteed.
A 50-year mortgage could be a prudent tool to lower your financial floor if you plan on paying more per month, and could be useful for wealth building in limited cases, but it isn’t necessarily a solution to housing affordability.
