What the Trump administration’s 50-year mortgage plan could mean for homebuyers

Would a 50-year mortgage make homeownership more affordable?

The Trump administration is working on a plan for a mortgage term that spans five decades, Federal Housing Finance Agency Director Bill Pulte confirmed this weekend, calling it a “complete game changer” and “a potential weapon in a LARGE arsenal of solutions we are currently developing.”

Details are still scarce, but a 50-year loan could significantly reshape a real estate market where 30 years is the norm. Experts say homebuyers who opt for a longer loan term would see their monthly payments decrease but a dramatic increase in the total cost of the loan.

“Borrowers might be able to pay less principal and interest monthly, since the loan would be spread out over half a century,” NerdWallet loan expert Kate Wood said in an email. “But the total interest paid over the life of the loan would be staggering, since even with a low rate, you’re looking at 50 years of interest value.”

Take a homeowner who wants to purchase a $400,000 home with a 10% down payment, requiring a $360,000 loan. Even if the 30- and 50-year loans came with the same 6.25% rate — which experts say is unlikely — borrowers choosing the long term would only save about $250 a month, Joel Berner, senior economist at Realtor.com, told CBS News.

In reality, rates on 50-year mortgages would likely be higher than rates on 30-year loans, meaning those monthly savings could shrink further, he added.

Yet the total interest on that same 50-year loan would be about $816,000, almost double the $438,000 in interest paid over a 30-year term, he calculated.

At the same time, buyers with a 50-year mortgage would build equity much more slowly than those with shorter-term loans, Wood noted. This is because a larger portion of prepayments goes toward interest, leaving less room for capital.

“Repaying the loan over such a long period could also mean building equity at an incredibly slow pace,” she said.

Facing the affordability crisis

The 50-year mortgage proposal aims to boost housing demand at a time when many Americans are priced out of the market due to high mortgage rates and soaring home values, Berner noted.

The typical homeowner now spends 39% of their income on housing, well above the 30% affordability threshold recommended by financial experts, according to Redfin.

Mortgage Rates have reduced this year but remain above 6%, more than double the pandemic-era lows. Meanwhile, home prices, while down slightly from their peak, averaged $410,800 in the second quarter, about 25% higher than at the start of 2020, according to data from the Federal Reserve Bank of St. Louis.

Although 15-year mortgages are also available, most buyers opt for 30-year loans because the terms allow them to spread payments over a longer period, thereby reducing monthly costs, according to personal finance site Bankrate.

The Federal Housing Finance Agency said it was “evaluating all options to address housing affordability,” including making mortgages assumable or portable. A White House official added that “President Trump is always exploring new ways to improve housing affordability for everyday Americans.”

What about the interest rate on a 50 year loan?

A half-century mortgage would give Americans an even longer window to repay their loan, but experts say the monthly savings would be relatively modest because interest rates for 50-year loans would likely be higher than for 30-year loans.

Indeed, lenders view longer terms as carrying higher default risks, notes NerdWallet’s Wood. Similarly, rates for 15-year mortgages are generally lower than 30-year loans because lenders view the shorter term as less risky.

The typical 15-year loan today has an interest rate of about 5.6%, according to Bankrate, compared to about 6.25% for the 30-year loan.

Longer loan terms could boost buyer demand, but it could push home prices even higher unless more homes are built, Berner added, erasing any benefit from lower monthly payments.

“This is not the best way to solve the housing affordability problem,” Berner said.

Mr. Trump defended the 50-year mortgage in an interview with Fox News on Monday after host Laura Ingraham asked the president about his criticism of the plan. Ingraham noted that some members of his MAGA base argue that the proposal would benefit banks while making it longer for Americans to fully own their homes.

“It doesn’t even matter,” Mr. Trump replied. “You go from 40 to 50, and that means you’re paying something less.”