"A proposal floated by the Trump administration to create a 50-year mortgage product to improve housing affordability could offer significant immediate savings to homebuyers, but at the steep cost of a doubled interest payment burden over the life of the loan, according to a recent analysis by John Lovallo of UBS Securities. Caveating that many basic questions remain unanswered, a back-of-the-envelope calculation shows a clear trade-off between immediate monthly affordability and long-term debt accumulation."
"Based on Lovallo's estimates, the extended loan term could lower the monthly payment on a median-priced home by roughly $119. While the short-term financial relief is meaningful for consumers struggling with current housing costs, the long-term fiscal penalty is severe. According to the UBS analysis, extending the loan duration from three decades to five decades could double the dollar amount of interest paid by the homebuyer on that median-priced home over the life of the loan."
A proposal for a 50-year mortgage would lower monthly payments on a median-priced $420,000 home by about $119 while substantially increasing lifetime interest costs. Extending typical 30-year terms to 50 years can roughly double the dollar amount of interest paid and slow equity accumulation for homeowners. Many basic questions about the proposal remain unanswered, and the extended repayment schedule raises demographic concerns given the average first-time buyer is about 40 years old. The average borrower could face an additional roughly $389,000 in interest over the life of a 50-year mortgage compared to a 30-year loan.
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