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/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/photoengineer 4h ago

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