Is The 50 Year Mortgage Really A Good Idea?
Is the 50 Year Mortgage Really A Good Idea?
Market Insights / Atwood Group Real Estate
President Trump has mentioned the idea that a 50-year mortgage could be a way to help tackle the housing affordability crisis.
Housing economists aren't sold on this yet though. Economists Speculate that homebuyers would pay much more in interest and equity would grow much slower which could be very costly.Increasing the housing supply is really the root of the affordability problem.
Recently, President Donald Trump floated the idea of creating a 50-year mortgage to help tackle the affordability crisis.
Soon after, Federal Housing Finance Agency Director Bill Pulte called it "a complete game changer." “The 50-year mortgage is simply a potential weapon in a wide arsenal of solutions" to the housing affordability problem.”
But is it? Some Real Estate experts question this idea.
Lower Monthly Payments
A 50- year mortgage would decrease your monthly payments, however, there wouldn't be a huge difference in savings, according to Joel Berner, senior economist at Realtor.com.
Housing Economist Berner, estimates that a 50-year loan would save "at most" about $250 per month compared to a 30-year loan.
Berner came to this conclusion by comparing what the costs would be for a $400,000 home — with a 10% down payment and a 6.25% rate — for 30-year and 50-year loans. The chart below is assuming the same rate for each loan, but in reality the rate for the 50 year mortgage would likely be higher due to loan being riskier for the lender.
Lets Take A Look For Ourselves
Loan Details
Purchase price: 400,000
Down payment: 10%
Loan amount: 360,000
Interest rate: 6.25% (same for both loans)
Monthly Rates
Monthly interest rate: 0.0625 / 12
1. Monthly Payments
30-year loan (360 months)
Monthly payment: $2,216.58
50-year loan (600 months)
Monthly payment: $1,961.90
The 50-year loan drops the payment by about $255 per month, which sounds nice but the long-term cost isn’t.
2. Total Interest Paid Over the Life of Each Loan
30-year loan
Total interest: $437,969.49
50-year loan
Total interest: $817,141.12
That’s not a typo. Stretching the mortgage to 50 years adds about $379,171 more interest. That’s almost another house.
Quick Comparison
30 years Loan Term Monthly - $2,216.58
Payment Total Interest Paid - $437,969.49
—
50 years Loan Term Monthly - $1,961.90
Payment Total Interest Paid - $817,141.12
Interest Difference from 30-yr - +$379,171.62
Twice As Much Interest
Monthly payments would be lower, however the total interest paid is much higher. During the first several years most of your payment goes towards interest. With the 50-year mortgage it would take longer to build equity.
What does that mean? Homeowners are underwater on their home for a longer period-of time. The faster you build equity (by reducing your principal), the less interest you pay, and that’s A LOT of interest over 50 years, as we have seen in the graph above.
The 50-year loan term does provide short-term payment relief but does limit your wealth-building opportunity compared to a shorter-term loan.
Will Home Prices Increase?
Some say that the 50-year mortgage doesn’t solve the insufficient home supply but acts more like a subsidy for housing demand. In other words it would add buying power for homebuyers but it wouldn’t increase the supply of homes.
More Risk For Lenders
Lenders haven’t been too excited about the 50-year loan possibility and have stated lenders may not want to offer the product because the risk of a much longer loan term.
Bottom Line
If someone absolutely needs the lower monthly payment, a 50-year mortgage gives breathing room. But the long-term cost is brutal. Most buyers are better off sticking with 30 years or doing a hybrid like 40 years if the lender offers it.
FAQ:
Q: If I am a VA buyer, is it a good idea to use the VA “home inspection” done at the time of the appraisal instead of hiring my own home inspection?
A: The short answer is no.
The VA appraisal is not a full home inspection. It’s only meant to confirm the home meets VA’s Minimum Property Requirements and that the value supports the loan. It does not dig into the things that actually matter for your safety or your wallet.
A real home inspection looks at:
• Roof condition
• Plumbing and water pressure
• Electrical safety
• Foundation and structural issues
• HVAC performance
• Attic, insulation, ventilation
• Appliances and overall system health
The VA appraiser won’t crawl in the attic, check outlets, test drainage, or look for hidden issues. If something breaks after you move in, the cost is yours.
Hiring your own inspector gives you real protection. It’s the smartest move you can make as a buyer, VA or not.
Contact: Debbie Atwood, when you start your home search!
📞 425-750-4970
🌐 www.atwoodgrouprealestate.com
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I can’t recommend Debbie enough! Awesome is an understatement. Debbie had a busy schedule out of state but still managed to make sure we were well taken care of and all questions were answered.Looking for someone with lots of knowledge in the home buying process with quick response time she is the go too! Don’t hesitate you won’t regret it!
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