How a 50-year mortgage could affect equity and monthly payments

"The idea of the 50-year mortgages flooded the news recently. It is the newest attempt by the Trump Administration to bring down housing costs, but I don't think it was thought through entirely. On paper, it seems like a crazy but good idea. 50 years is a long time, but at least it would allow people to enter into the housing market. But as soon as you dive into the numbers, you realize how the 50-year mortgage could ruin the real estate market forever."

"Without looking too deep into the subject, most people assume it could be good because there will be lower monthly mortgage payments which would then allow more people to purchase homes. Sure, 50 year years is a long time, but how many people actually stay in their homes for the entire life of their mortgage? In order to truly understand how detrimental this may be, we need to look at a few things. First, the length of the loan."

"This is where they get you. Right now, people are reporting that the 50-year mortgage would decrease monthly mortgage payments by 15%-20%. This is a huge deal for people. More people would be able to afford homes than ever! Hypothetically, you take out a 30-year mortgage loan for $500,000 at a 6.5% interest rate and find out the monthly payment is $3,000. If we then run that same scenario again but over 50 years, monthly payment"

50-year mortgages lower monthly payments by roughly 15–20% compared with 30-year loans, increasing short-term affordability and buyer qualification. The extended term pushes loan payoff into advanced ages for typical first-time buyers—the average first-time buyer age of 40 implies paying off at about 90. Most homeowners move every 10–11 years, so many never carry the full mortgage term. Long-term loans can leave elderly homeowners carrying debt and increase lifetime interest paid, potentially making affordability gains illusory. Extended terms could alter housing turnover dynamics and mortgage market risk structures, with possible long-term effects on real estate stability.

Read at www.housingwire.com