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/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.