Good news for banks: Trump’s 50-year mortgages are a banker’s dream and a house buyer’s nightmare

President Donald Trump floated the idea of creating a 50-year mortgage to help lower the cost of buying a home. He posted about the idea after a brief presentation from his Federal Housing Finance Agency Director Bill Pulte, who has touted it as “a complete game changer.”

The proposal has received blowback from the MAGA base calling it a giveaway to the banking industry. Housing experts and financial advisors are also slamming the idea, warning that it would make homeownership more expensive.

Trump’s plan doesn’t address root of housing affordability crisis

“The appeal of the 50-year mortgage is to offer lower monthly payments to homebuyers,” explained Realtor.com senior economist Joel Berner. The idea is that more people would be able to afford a home thus creating more demand. He warned though that that could be a double-edged sword, as the current affordability crisis is due to a lack of supply.

“Longer loan terms do not address the true cause of today’s affordability challenges, which is the limited supply of homes in the low- and middle-price ranges,” said Lawrence Yun, chief economist for the National Association of Realtors. So, if supply doesn’t meet the newfound demand, it could send housing prices soaring, essentially wiping out any potential savings from lower monthly payments.

Housing experts explain the financial drawbacks of Trump’s 50-year mortgage proposal

Furthermore, longer period mortgages come with more major drawbacks for homebuyers. “A 50-year mortgage results in almost double the interest payments of a 30-year mortgage,” Berner pointed out, adding, “the longer the life of the loan, the more compensation the lender will demand.”

Since longer loans are riskier gambles for banks, they charge more interest. According to Freddie Mac, the interest rate averaged 6.22% on a 30-year mortgage last week compared to 5.5% for a 15-year mortgage.

Currently, 30-year mortgages are the longest ones available to Americans for purchasing a home. How much more that rate would be for a 50-year mortgage is anyone’s guess but over the life of a loan the extra interest payments add up, a lot.

Realtor.com calculated that a person with a 50-year mortgage would pay 86% more in total interest over the life of the loan compared to a 30-year mortgage even if the interest rate was the same for both.

Additionally, homebuyers would build up equity at a much slower rate. “It would also take almost 40 years to pay off half the balance, meaning most borrowers would not begin building meaningful equity until the final decade,” explained Yun.

“The slow equity build would make trading up or down very difficult,” he cautioned.

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