If we told you that Americans are struggling to afford homeownership, we wouldn’t be telling you anything new.
Housing prices have risen in perpetuity for decades, and the past few years have been particularly painful for prospective buyers—so much so that the sky-high costs of owning a home make for regular headlines in everyday media.
So it probably goes without saying (though we’ll say it anyways) that Americans are in desperate need of ideas that would lower their burden and make housing more accessible to more than just the ultra-rich.
And very recently, a new contender entered the arena:
The 50-year mortgage.
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First-Time Homebuyer Data Gets Uglier
As I just said, there’s nothing new about Americans’ struggles to find affordable housing, but a pair of recent data points from the National Association of Realtors (NAR) really drive the message home. In early November, the NAR reported that:
- The share of first-time homebuyers fell to an all-time low of just 21% of all homebuyers.
- The typical age of first-time homebuyers climbed to an all-time high of 40 years.
Put differently? An increasing majority of homebuyers are those who have already purchased at least one home—and thus have an asset they can sell to put toward the purchase of a new home.
Young and the Invested Tip: Selling a home is like selling many other assets in that you’ll likely owe capital gains taxes. Here’s what you need to know about this kind of tax.
Meanwhile, the minority share of first-time homebuyers is becoming increasingly older, implying that Americans must save for longer than ever before to be able to afford taking the dive into homeownership—and it’s doing so pretty rapidly. The median age of first-time buyers, now at 40 years old, was 38 last year, and 33 just five years ago.
The troubling but unsurprising acceleration aligns pretty much perfectly with an explosion in the two most core components of purchasing a home: home prices …
… and mortgage rates:
Theoretical fixes typically have to do with America’s housing deficit, which hit an all-time high 4.7 million homes in July despite a pick-up in construction.
Recently, President Donald Trump floated a fix that would approach the crisis from a different angle: financing.
Specifically, he proposed a new 50-year mortgage plan.
Of course, that’s about as specific as the proposal got.
Source: Truth Social
Adding a whiff of legitimacy was U.S. Director of Federal Housing Bill Pulte, who said on X (formerly Twitter) that “we are indeed working on The 50 year Mortgage – a complete game changer.”
Whether this idea will have any legs remains to be seen, but the initial reaction among economists, analysts, and other experts is … well, skeptical.
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Can a 50-Year Mortgage Really Help?
On its face, the logic seems pretty straightforward: Spreading out the same home price over a larger number of monthly payments would reduce the size of those monthly payments.
“From a simple affordability perspective, we estimate that a 50-year mortgage product (with a 50bps higher rate) could lower the monthly payment on a median priced home (~$420K, assuming a 12% down payment) by roughly -$119 or increase an average consumer’s buying power by almost $23k, relative to a 30-year mortgage,” says a team of UBS analysts led by John Lovallo.
The problem, of course, is you’re not just extending the loan principal across 20 more years—you’re also stretching out the interest payments.
And as Lovallo and others point out, that small improvement in month-to-month affordability would come at a significant cost.
“Extending the term reduces the monthly cost, but it dramatically increases the amount of interest a borrower pays over time,” Jose Pascual, Head of Mortgage & Commercial Banking, PSECU, a Pennsylvania-based credit union. “On a $500,000 loan at current rates, the interest paid on a 50-year mortgage would more than double the overall cost of the loan.”
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And again, that’s assuming current rates.
“The interest rate would most likely be higher than a 30-year mortgage,” says Carolyn Morganbesser, Associate Vice President of Mortgage Originations at Affinity Federal Credit Union, who added that a 50-year mortgage “is not a necessary lending option, but it would depend on the borrower.”
Why would interest rates be higher? Well, for one, longer maturities mean lenders are taking on more risk, which they offset by charging a greater rate.
But Lovallo adds that the Dodd-Frank Act would have to be amended to classify 50-year mortgages as qualifying loans. Failure to do so could result in the mortgages carrying even higher interest rates than what the longer maturity alone would demand.
There’s also the downside of slower amortization (paying down the loan). Pascual notes that by the time a homeowner could pay off a 30-year mortgage, the borrower of a 50-year loan would have paid down just 26% of their original balance—limited progress that doesn’t really benefit the borrower.
And all of that assumes the homebuyer is even still alive to make all of those payments.
“Other potential complicating factors include the fact that the average first-time buyer is 40 years old (overall average buyer is 59) and therefore could be deceased before a 50-year mortgage matures,” Lovallo says.
In many ways, the math simply isn’t mathing—at least not in a way that provides a net benefit to would-be homebuyers.
“There’s nothing wrong with creative repayment structures when they truly improve affordability, but consumers should be careful not to substitute lower payments for long-term financial stability,” says Mike Petrakis, CEO of lender PowerPay. “A 50-year mortgage might work for a narrow group of borrowers, but it shouldn’t become the default solution for the pressure buyers are feeling in an already competitive housing market.”
Never say never, of course—Year 1 of Trump Part 2 has been nothing but proof that we should expect the financially unexpected.
But when even the Treasury is throwing cold water on an idea, we probably shouldn’t hold our breath.
“That was one proposal,” Joe Lavorgna, a counselor to Treasury Secretary Scott Bessent, said during an appearance on NewsNation’s The Hill. “The feedback has been such that probably—and it did not come from Treasury—but probably not an optimal approach.”
Disclaimer: This article does not constitute individualized investment advice. These securities appear for your consideration and not as personalized investment recommendations. Act at your own discretion.
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