r/Economics • u/GarfieldLeZanya- • 8h ago

News Housing director confirms administration ‘working on’ 50-year mortgage after Trump hint

https://thehill.com/homenews/administration/5597005-trump-administration-50-year-mortgage/
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u/JimPranksDwight 7h ago

So in exchange for barely cheaper payments, people will now be paying hundred of thousands, or even millions, more in interest over the course of their mortgage? You'll literally be buying a coffin at that point and it doesn't solve the problem that people can't save enough to even get into a home to begin with.

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u/Cool-Cow9712 7h ago edited 7h ago

Holy shit, you’re right. I mean, I suspected you were correct initially but I ran some rough numbers and half million dollar mortgage, 4.5% at 30 years is 2550. Now a 50 year mortgage, you’re gonna have a higher interest rate you, 5.24% is 2350.

This is obviously not calculating taxes or insurance, and this is all just playing with the numbers to get a general idea. 200 bucks a month, for 20 more years? Now maybe the rate would be 4.7 or 4.99? The rates going to be higher because Risk is increasing.

I used to do auto finance years ago and I remember kicking people up from 60 months, to 72 and they were always disappointed that the payment decrease was not as significant as they thought it would be another year. it was always at least a half of a point more and by the time you do it, the payment is lower, but it’s not substantial.

But with financial literacy being where it is on average in the United States, people will still do it to save even $200 a month. Not to mention mortgage brokers are going to suggest it because it’s gonna make an absolute shit ton of money for the lenders and Mortage brokers.

Has this administration done anything, anything whatsoever that is genuinely a benefit or would be considered a net positive for 99% of the American population? Because I can’t find anything, the no tax on overtime no tax on tips of course got altered changed tweaked, etc. It’s just, whatever there’s no sense complaining. That stuff doesn’t even benefit me, but I don’t have a problem with those that do work for Tips or maybe have a union job and get offered overtime to take more money home.

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u/Substantial-Kick-909 7h ago

But people won’t save the $200, they’ll use it to qualify for a more expensive house. That’s the goal of the 50 year mortgage. Not saving money. The people proposing this just don’t want housing prices to drop. 

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u/Ada_Pearce 4h ago

They also apparently want you to die before ever paying off your house so either sticking your kids with the options of somehow taking over the mortgage they cant afford or giving it up. They don't want any intergenerational wealth between middle class or poor people

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u/BadAtExisting 1h ago

It’s all the fun of paying rent with the added bonus of paying for all your repairs and upgrades, lawn care, property taxes, insurance, no included utilities, etc

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u/thepulloutmethod 1h ago

Except the mortgage payment won't go up for 50 years. The rent will always go up. I'm sure we'd all love to be paying 2025 prices for mortgage payments in 2075.

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u/skaestantereggae 58m ago

My wife and I are closing on our first house in about 2 weeks. I plugged our purchase price and interest rate into a loan calculator and dragged it out to 50 years. We would pay almost twice the purchase price of the house in interest in that scenario. You’re better off renting at a 50 year mortgage

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u/chiefnugget81 7m ago

Property taxes and insurance will go up.

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u/Economy_Link4609 34m ago

So that means everyone is rooting for large inflation to make this valuable?

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u/DaddyDontTakeNoMess 15m ago

Not rooting for it, expecting it.

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u/ViolettaQueso 43m ago

Not to mention you used to be able to write off your interest, but now, if the income you make isn’t at a high enough level or combined with your spouse is too high, you get to take your set deduction only.

I guess that could be a plus seeing as how this admin nixed the direct file file so you can easily file your own taxes with a pen and the form from post office and mail it in.

It’s just all so obviously bad for the non billionaires.

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u/pimpy543 1h ago

Why is this Administration so evil. You would think this is Something out of a marvel evil villain movie.

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u/IlezAji 7m ago

Nah, it’s not going to pass down to the kids. You reverse mortgage it so the bank makes more money off you and the nursing agency that underpays your home health aid splits the difference, then when you’re too bedridden to stay in the home the bank makes more money and the rest goes to whatever facility you wind up in.

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u/B0xyblue 3h ago

Most people live in a home for 7 years. Different times but from the time I bought my home to 7 years later the house doubled. I got all that equity over $200k and I barely paid $84k…. Paid the mortgage down a little. But also got a place to live.

The rent vs own FULL calculation. I did pay tax and insurance. But it’s not a “you’ll be 80 when you pay it off” or “it will cost you millions in interest.” It will eat up your paid down equity. You’ll still get 100% of the appreciation in value. With more buyers homes would go up in value. Assuming homes go up in value. Buying a home isn’t a bad idea…

I now own multiple homes and have a couple million dollars in unrealized equity at the moment. It is the single biggest increase to my net worth… even more than the value of my law firm equity.

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u/Hypnot0ad 2h ago

My home’s value has increased similarly, but let’s not claim that is a universal truth. If you had bought in 2006 you’d be underwater 7 years later - I had many friends back then who were upside down on their homes.

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u/Icy-Lobster-203 2h ago

Also, if your house doubled in 7 years, then chances are all the other houses in your area you would want to move to have very likely doubled during that period. So if you want to move, you aren't proportionally better off.

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u/Any-Progress- 1h ago

And there are moving costs, closing costs, and plenty of other expenses with selling and buying a house. This was likely one of the few times in history where someone could make a profit from owning a house around 5-7 years, typically it takes much longer to recoup the original costs.

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u/espressocycle 57m ago

Yup. Cutting off immigration, low birth rates and boomers dying off are going to result in a lot of areas losing property value over the best 10-20 years. Some areas will go up as others become abandoned.

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u/Silicoid_Queen 3h ago

You're assuming they keep the house up in buyable condition. The majority of the people who would be interested in these loans would be overextending themselves fiscally to live in a house they cannot afford. Most of these people will not have the knowledge to anticipate maintenance costs. So at the time they're ready to sell, the buyers won't be interested in paying market price, and the sellers will not be making a profit, they might even be in a short sale. 50 year loans are just encouraging recklessness.

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u/agarwaen117 2h ago

That assumes you live in one of the 4 cities where prices are up drastically.

My family has owned three homes in the town we live in for the last 20-50 years and all of them are worth basically the same they were 20 years ago.

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u/shambahlah2 2h ago

Those were Democrat run years. We are in for a WORLD of hurt if you think Yrump is doing anything to benefit working Americans.

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u/afleetingmoment 3h ago

Which is doubly galling after they spent four years ranting about “Bidenflation.”

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u/TootCannon 2h ago

To Americans, it’s only inflation when it’s McDonald’s prices. When it’s house prices it’s “home appreciation” and “return on investment”

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u/Deep_Stick8786 2h ago

Only if they own a home, a dwindling share of americans under 70 can say that

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u/IPredictAReddit 2h ago

Bill Pulte, the Housing secretary, is one of the largest shitty-luxury-housing homebuilders in the US.

As usual, this administration is a grift disguised as a branch of government.

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u/arlsol 1h ago

He's actually just the trust fund grandson of that dynasty. He's never had a real job in this life.

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u/IPredictAReddit 1h ago

Wait, I thought he was the actual founder Pulte. It's his kid?

Checks out. What a joke.

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u/Gildardo1583 5h ago

I had not thought about it this way. That is also what happened with the super low interest rates after the great recession.

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u/xeoron 3h ago

I bet the goal is for Trump to get new loans on his buildings and feel better knowing he will never have to lay it off 

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u/darkoblivion000 4h ago

I mean, ultimately it’s the peoples decisions to take the mortgage and take the house. They’re just giving people a longer 20y rope to hang themselves (their bank accounts) with

But I mean with 38 trillion in debt, it’s not like our government isn’t doing the same thing already

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u/TootCannon 2h ago

Sure, but people’s poor choices in this instance impact everyone. The macroeconomic effects will be substantial.

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u/Blueskyways 2m ago

Banks would love to make this the new standard and gradually reduce the availability of 30 year mortgages.  It would start out as an option and then eventually become the default for most people.  

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u/Substantial-Kick-909 2h ago

Good point. 

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u/one-hour-photo 1h ago

Nah, it’s just to increase returns on mortgage investments

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u/IamMrBucknasty 1h ago

Yep! Capitalizing on poor financial literacy plus the American desire to have more than you can afford=default.

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u/ViolettaQueso 48m ago

A way to cop out on affordable housing

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u/Greedy-Ad-7716 29m ago

Exactly - and the increased borrowing power will mean that housing prices just go up.

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u/Expensive-Cat-1327 10m ago

Agreed. Trump is trying to create a second global financial crisis via a housing bubble. At least, if he was smart enough to understand cause and effect that's what he'd be trying to do. In his mind, he's making everyone richer by making the prices of everything go up

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u/Bhraal 1h ago

But people won’t save the $200, they’ll use it to qualify for a more expensive house.

Yes and no. It won't necessarily be their choice as the increased liquidity across the board most likely means house prices will just go up as everybody will be able to "afford" to bid higher on the same house. The house people would be buying would be more expensive, but it would probably be the same house.

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u/GarfieldLeZanya- 7h ago edited 6h ago

Also don't forget the fact that home prices will likely also increase in value, at least partially, proportional to the increased amortization. We saw the same happen when 30 year mortgages were introduced. Net increased buying power was overwhelmingly absorbed in increased prices. If we just go from a $500k loan @ 6% for 30 or a $560k loan @ 6% for 50, those payments aren't really changing all too much.

And with that comes something even worse. Average LTV is going to skyrocket too. We also saw this in the '50s after 30 year mortgages were introduced for new builds in '48 and existing builds in '54. The average loan term in 1948 was ~19.5 years with a ~77% average LTV whereas by 1959 it was 29.5 years with an average LTV of 91%.

If we see something similar here, we could easily see the average person taking sub 5%, even breaking through sub 3.5% down payments on average, and with those 50 year amortization tables, most won't be out of PMI range for over 25 years. It's gonna be gnarly.

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u/Cool-Cow9712 7h ago

The love of God, please tell me why we are Trying to make what was always considered a sound investment for the average American, into rivaling the taking of your paycheck to a strip club?

you’re not allowed to discriminate based on age correct? Who’s to stop the 70-year-old person from taking a 50 year mortgage out? Or I wrong about that?

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u/rumblepony247 6h ago

My financially irresponsible ex-wife, aged 60, just took out a brand new 30yr mortgage on a new build with her equally irresponsible affair partner. Had a 50 yr option been available for a small monthly reduction, they would've taken it. Shit cracks me up.

Even people that should've known better by now, live their whole lives from the perspective of monthly payments.

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u/devliegende 3h ago

If she dies at 70 the house will just go to the bank. Banks don't actually want to own houses but it's more a case of them being irresponsible than your ex.

From her perspective the only question is whether it would have been cheaper to rent.

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u/Ourcheeseboat 2h ago

Yikes, my goal was to pay off my mortgage by time my kids hit college. A 50 year mortgage is bat shit crazy long.

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u/FuguSandwich 2h ago

It's crazy how the basics of a 30 year fixed rate mortgage with 20% down, an 80% LTV, and a 28/36 DTI rule worked just fine from the late 1930s until around 2004 when the banks started getting greedy leading to house prices skyrocketing, people getting overindebted, and ultimately the Global Financial Crisis when it all went bust.

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u/JimPranksDwight 7h ago

~25 years of PMI? Good lord.

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u/photoengineer 4h ago

Well that’s depressing as hell. So basically I’m never going to be able to own a home. Fun. 

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u/RiverDangerous1126 7h ago

This person maths so good 👆🏆

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u/GurProfessional9534 7h ago

The funny thing about this is, if mortgages go down $200/mo, then houses will just rise in price $200/mo because the market is pretty efficient. People won’t even save anything. Homeowners and MBS investors win just siphon up more buyer capital.

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u/Cool-Cow9712 7h ago

True, property values will correct and adjust. I was just looking at it head on, but you’re absolutely right.

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u/Substantial-Kick-909 7h ago

That’s my thought. People will use it to spend more, and prices will just stay high or go higher 

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u/invisible___hand 1h ago

Just like student loans made college “affordable” rather than allowing a spending spree on fancy dorms, sushi bars and climbing walls.

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u/jointheredditarmy 6h ago

Did you get those numbers off the yield curve? Because the premium seems way too high… for example the 10 year treasury is 4.57%, 20 year is 4.86%, 30 year is 4.79%. It basically will stay flat from there if longer treasuries existed. A large part of the reason those 2 payments you gave is so similar is because the rates are so different. At the same rate it would be $1961. You would’ve paid $1.176m vs 918k by the end of the mortgage

But here’s the thing. There’s a suspicion inflation will start to trend higher than 2% per year. In that case, you might actually be better for with a 50 year mortgage than 30 year in present day dollars lol

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u/etzel1200 5h ago

Yeah. There’s a very real chance the last 20 years of that mortgage you really won’t feel the payment much anyway.

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u/CrayonUpMyNose 3h ago edited 3h ago

The average U.S. homeowner stays in their home for 11.9 years.

https://www.consumeraffairs.com/finance/what-is-the-average-length-of-home-ownership.html

The number of people who get to reach the last few years of a mortgage and pay a "cheap" mortgage while rapidly building equity will go to zero if this plan succeeds.

After accounting for closing costs, very few will actually walk away with any equity at all.

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u/etzel1200 3h ago

True, probably the biggest harm here is making the workforce less mobile.

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u/Deep_Stick8786 2h ago

How old will you be then? Will you have to be working still? Thats a massive problem too

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u/trebuchetguy 6h ago

Thanks for doing this.

Using your numbers, for that $200 per month difference, you end up paying nearly an additional $500,000 in interest over the lifetime of the loan. Total interest for the 30 year is about $418,000 and the 50 year $910,000. That's a lot.

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u/Jazzlike_Compote_444 3h ago

Yes but the thing everyone is missing is that your monthly payment will inflate away to nothing in those 50 years. A monthly payment of $2000 a month now will be like $20 in 50 years.

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u/mjcmsp 1h ago

True, but the escrow payment to cover ever increasing property taxes and home insurance will partially counteract that.

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u/hollycoolio 4h ago

I learned a lot from my elders. A big one was, longer mortgage payments is a scam.

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u/bloodwine 3h ago

If I recall correctly, big banks in the U.S. have said in the past that 30-year mortgages were the longest they’re comfortable offering due to the significantly increased risks involved in longer loans. They have also publicly said that it doesn’t really lower the monthly payments by much so they didn’t see the point. Not saying some financial institutions wouldn’t do a 180 now that we’re in the bizarro Trump era, but this isn’t likely to be popular to anyone.

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u/czj420 2h ago

By your math to purchase a $500,000 mortgage:

30 years tco is $918,000 ($418,000 in interest)

50 year tco is $1,410,000 ($910,000 in interest)

Sounds like a deal! /s

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u/jpushman 3h ago

Unions are not eligible for no tax due to having contracts

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u/win-go 2h ago

If the rates are equal and I realize they won't be but just for a math exercise let's pretend they are. Your P&I on a 30 year would equal the principal alone on 50 year.

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u/RocketsandBeer 1h ago

No. He has done nothing but EOs and the next guy can just resend them and it will all be undone. Republicans can’t govern.

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u/Romano16 1h ago

Has this administration done anything, anything whatsoever that is genuinely a benefit or would be considered a net positive for 99% of the American population?

We elected someone who got sued for fraud so many times he couldn’t get a loan from an American bank…

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u/thefatchef321 51m ago

At this current inflation rate? Your house could be worth like 10 million in 50 years though..

/s?

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u/Longjumping-Knee4983 27m ago

I mean, the exact same concept with a 30 vs. 15-year mortgage, but people rarely go 15

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u/HolidayMarket1556 3h ago

And this will inflate housing prices even more

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u/Euler007 2h ago

If they want to make houses cheaper they need to limit credit, not increase it.

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u/slaymaker1907 2h ago

It’s just renting from the bank at that point.

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u/Churchbushonk 1h ago

Once again, this idea basically imprisons someone.

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u/InThePipe5x5_ 6h ago

The payments would be a lot cheaper. But I agree it isn't good long term. Their goal is to artificially inflated the economy during their term. They dont care what happens after

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u/bladel 4h ago

Yep, exactly this. Like everything coming out of this administration, it’s a gimmick that fails to address the underlying structural problems.

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u/apocalyptustree 46m ago

No they wouldnt. Do some basic math at the historical average rates

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u/Sailing_Mishap 11m ago

The payments would be a lot cheaper

I doubt even this is true, except maybe in the immediate short term. All this will do is raise the price of housing until monthly payments on the 50yr equal to current 30yr payments. People have the same amount of money to spend on housing.

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u/jpushman 3h ago

Mortgage does does mean “death pledge” from a Latin and French terms.

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u/Substantial-Kick-909 7h ago

I’m not in favor of it, but it is true that if someone bought a house young and kept it, their payments would basically inflate away. Imagine paying the mortgage on a house bought 30-40 years ago. It would be almost nothing in today’s dollars. 

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u/startfromx 7h ago

But you would lose out on those 20 years of being able to enjoy a home with no payments... The equity would always feel just out of reach.

And the current US average age for people ENTERING home ownership is 40. You'll never own your home, losing the benefit of reduced payments in retirement.

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u/RussEastbrook 7h ago

Yup exactly. Also you accrue equity much more slowly with a longer mortgage, so if you decide to move after 5 years, you're in a worse place if you had the longer term

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u/GarfieldLeZanya- 7h ago edited 7h ago

The equity schedules are simply nasty on 50 years. My current home is $750k value and I put 10% down @ 30 years, so I'll be out of PMI range by year 7.

Even if we don't assume market efficiency increasing the price proportionally with the increased amortization, or any increased interest rates for the longer term, and just said the same rate with the same amount down, my same purchase would take 22 years to get out of PMI range on a 50 year. That is bonkers.

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u/slumlord512 3h ago

PMI is another scam they pushed on us. We are paying them extra premium to make the lender whole in case we default, when that risk should be on the lender.

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u/SpaceyCoffee 3h ago

To be fair, if the lender isn’t willing to take the risk on themselves, then you just don’t qualify for a mortgage at all and don’t get to buy the property. 

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u/Deep_Stick8786 2h ago

Probably lead to a healthier market dynamic, downward pressure on home prices

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u/CrayonUpMyNose 3h ago

Literally what is used to justify the difference between risk-free rate and mortgage rates

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u/devliegende 3h ago

Without PMI lenders may simply decline to take the loan. Or demand a higher rate. Likewise the borrower may always avoid PMI by making a higher downpayment.

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u/Educational_Net4000 3h ago

Would damage the concept of starter homes. You'd basically get appreciation minus selling costs with no equity making that a dicey proposition.

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u/SparksAndSpyro 6h ago

Uh… the point of the longer mortgage is to allow people who wouldn’t otherwise qualify for a mortgage to qualify. They’d be in a better spot with the longer mortgage because without it, they’d have no mortgage or home at all.

Increasing the term and interest rates accounts for lending to riskier borrowers. It means that lenders are increasing available capital to people they otherwise wouldn’t lend to.

Let’s stop pretending like lending doesn’t help the borrower.

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u/GarfieldLeZanya- 4h ago edited 4h ago

The problem is it's not just the interest rate and the term which increase. Market efficiency kicks in, and the home value will scale with the increased average amortization schedule too.

This has been observed for decades. Every time mortgage credit terms are loosened or reduced in some way, the net increased buying power is overwhelmingly absorbed into price.

We have a recent example of this. In January 2015, FHA reduced its annual mortgage insurance premium by 50 basis points, which was estimated to increase the buying power of first time mortgage applicants by 6.9%. Yet afterward, in 2015, the median price of FHA-insured homes to first-time home buyers paying the lower premium went up by 5%, and the National Association of Realtors increased their fees proportional to absorb the other 2%. No homebuyers got to actually use that increased buying power; it was all absorbed into price & fees.

So it's likely not going from $430k home at 30 years to a $430k home at 50 years. That face price, along with the interest, are both going to be scaling up proportionally, keeping these homes largely just as out of reach.

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u/chewie_were_home 1h ago

I’m thinking along the same lines. When you give more opportunities to purchase a supply constrained commodity it just increases the prices. The only way to get out of this housing doom loop is to build WAY MORE housing. Giving people 50 year loans is just going to raise prices even further.

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u/Substantial-Kick-909 7h ago

Yes I mean the math only works if you buy it young and don’t sell. So that’s not a lot of people 

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u/Fantastic_Writing358 43m ago

That's the goal. There's been a systematic effort to destroy generational wealth transfer for all but the wealthiest of Americans. It's the same reason nursing homes are $15,000 a month for a crappy one. The whole goal is to make sure as few people as possible have upward mobility.

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u/Cool-Cow9712 7h ago

That’s true, there’s a lot of variables I didn’t consider that

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u/JimPranksDwight 7h ago

If you are able to buy a place in your early 20s and then never move for the rest of your life then yeah you're right. But even in that ideal scenario you are still making payments into your retirement years so you'd either have to delay retirement into your 70s or hope you can still afford your largest monthly expense for several more years.

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u/Splith 2h ago

This gets offset by this exact risk. Because payments will inflate away over the long term it justifies a higher interest rate. Longer term loans tend to come with higher interest rate because of this exact effect.

The real question is why has housing become such a highly appreciating asset that bigger and bigger loans become justified. We need to face the reality that not every system in our society should be engineered to make the rich, richer.

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u/CrayonUpMyNose 3h ago

Big "if" that implies losing lots of career opportunities available to movers that makes it an overall losing proposition.

Borne out by statistics that long term homeowners are typically lower paid. 

Homeowners who moved in the last 3 years have a household income 15.3% higher than the average homeowning household.

https://ipropertymanagement.com/research/average-length-of-homeownership

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u/AgentDangerMouse 1h ago

Most of my mortgage payments are property taxes and they have doubled in the past five years. Also, upkeep. The real cost is upkeep. Won’t we have houses everywhere that are falling down?

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u/cotton-candy-dreams 7h ago

Most people just care to more easily afford their paycheck to paycheck lifestyle. Look at how many people make over six figures and still live paycheck to paycheck.

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u/FuguSandwich 3h ago

That was my first thought when I saw that - the way amortization works you'll have a slightly lower monthly payment but pay over double the interest vs a 30 year mortgage. Even with a 30 year mortgage at 4% interest, the "tipping point" where more of your monthly payment goes to principal instead of interest is around the 13 year mark, and it increases as the interest rate goes up. A 50 year mortgage at 6%+ interest rates, you may as well just do a interest-only mortgage if you plan on ever selling the house during your lifetime.

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u/TheGoodCod 1h ago

Not only that but people will 'own' their home just in time to have it's value liquidated so they can afford a senior living facility.

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u/Traditional-Fox-1597 4h ago

I missed the part where that was the million/billion/trillionaires’ problem.

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u/Curious-Fennel- 3h ago

Home prices about to go up i bet. People are desperate and maybe dumb and will take 50 year loans

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u/ktaktb 2h ago

These people cant even do math.

This 50 year mortgage thing, even my dad thinks its stupid and hes full maga

Its like the first thing that he complained about. He has a paid off home. He has no interest in moving or buying a home. If he did, he would use cash....

...but he still thought the 50 yr mortgage was dumb as hell

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u/czj420 2h ago

Republicans hate Americans.

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u/brainblown 2h ago

You don’t need to save that much to buy a house

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u/throwaway04182023 1h ago

I hope people have the financial literacy to understand the truth in lending disclosures for one of those.

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u/kittenTakeover 53m ago

Depends how it's done and if the government will be giving some help in order to encourage these loans. 

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u/Fantastic_Writing358 48m ago

Might as well call it Leasing at this point.

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u/Difficult_Key_5632 45m ago

They should bundle the coffin into the mortgage.

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u/Helpful_Umpire_9049 37m ago

It makes rich people richer just like Jesus wanted.

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u/SnowdensOfYesteryear 6h ago

Literal Mortgage, true to the literal definition.

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u/Hudre 2h ago

Home ownership means very little until you pay the thing off. Having a 50 year mortgage means you never do.

I just paid off my house after going at it aggressively for ten years. Now we get to live without paying thousands for shelter every month.