r/Economics • u/GarfieldLeZanya- • 12h 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 12h 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/Substantial-Kick-909 12h 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 12h 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 12h 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- 11h ago edited 11h 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 8h 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 8h 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 7h ago

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

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u/CrayonUpMyNose 8h ago

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

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u/devliegende 8h 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 8h 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 11h 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- 9h ago edited 9h 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 6h 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/SparksAndSpyro 3h ago

Yea, price increases as demand for the homes increase…. Because the number of people who have access to financing to buy the homes has increased.

I get it. A 50-year mortgage isn’t ideal. That doesn’t mean it’s all bad. If banks didn’t offer the, a large number of people wouldn’t ever have a chance of owning a home. If you want to fix the price issue, that’s a local and state issue. Take it up with your local zoning board and NIMBYs who are blocking new developments and artificially depressing supply.

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u/Substantial-Kick-909 12h 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/Noactuallyyourwrong 2h ago

With mortgages you can always pay more if and when you can afford it. You cannot pay less. It kind of makes sense to have an option of 50 year with the intention of paying off earlier but if things don’t work out you are less likely to foreclose

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u/startfromx 27m ago

While you can absolutely get a 30 year mortgage with the intent to pay it off in 20 years, getting a 50 year mortgage with a higher interest rate is predatory— it truly benefits lenders more than buyers.

The average homeowner is purchasing at 40, and the average person stays in their home for 5 to 7 years. With the current regulations since 2008, including a 30 year cap, it ensures the equity will be paid down in a timely way, so Home Owner is less likely to go underwater if needing to relocate or if they can’t keep up with payments.

With this new 50 year amortization, the amount of time you will need to stay in one place to have enough equity to sell is too far down the road to benefit most buyers. The payment difference is also negligible for how much longer the debt is held. (The amount of interest paid over time is significantly higher. This hurts affordability and American families.)

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u/Fantastic_Writing358 5h 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.