I guess I’ve been lucky and genuinely don’t know anything about mortgages. He wants to extend them to 50 years. Is it infeasible?
Here’s an article that discusses it.
A fifty-year mortgage would definitely mean banks getting an awful lot of interest money.
That’s going to allow banks to charge higher interest rates, for longer periods of time, while keeping the monthly payment lower. Banks are going to make a ton of money and future home owners are going to be underwater for much longer time.
Just for kicks, I put some numbers into a random loan calculator.
$100,000 at 5% for 30 years would require a payment of $536 and the bank would make $93k in interest.
$100,000 at 6% for 50 years would require a payment of $526 and the bank would make $215k in interest
Or, if we keep the same interest rate, 5%, the payment is $454 and the bank would still make $172k in interest.
So with the same interest rate, you could ‘save’ about $80/mo but pay an extra 80k over the life of the loan.
Isn’t it going to be entirely optional for homeowners? In other words, homeowners who want to pay off in 20 years instead of 50 would be totally free to do so.
One problem I see for banks, though, is that many home buyers would be dead before Year-50 comes up.
And people generally suffer from severe innumeracy, so they won’t be able to grasp the fact they will be paying $80,000 more.
It’s like my brother in law bragging about his “free” phone, that he got with a 3 year contract of $95/month. He could not figure out why my $500 phone with the same service features at $40/month was a better deal. I tried to explain that his $3420 total payment over 3 years was more than my $1940 payment, but he just kept saying “I got a FREE PHONE!”
Considering what happened when various balloon options took their toll, I think it’s a foolish option to offer, though ideally it should be up to the buyer.
A big worry is 50 years is probably longer than the actual lifetime of a 30ish year old homebuyer. Who’s left holding the bag when a 65 year old homeowner croaks with 20 years left to pay?
[ ninja’d by Velocity while typing this ]
Plus, a paid-off home is one of the few assets a lot of older individuals have left these days (granted, for those who can afford a home in the first place). It’s going to make already difficult retirement planning that much worse.
And home-“owners” are going to be accumulating minuscule amounts of equity for an even longer amount of time.
And who does he suppose is going to be getting these mortgages anyhow? If you get one at age 40, you’re 90 when you pay it off. At 30, you’re 80 when you pay it off. If you want to pay it off by the time you retire, you have to take out a mortgage when you are 15!
Well, now that I think about it, that does make sense for Trump since that’s what the thinks the age of consent is.
Which is why they’ll be underwater for a much longer time.
Sure, and even if they’re not, unless there’s a prepayment penalty, they could pay it off in 30 years (or less) if they want to.
I’m not entirely sure if this is what you’re referencing, but it reminds me of the 2000’s sub-prime mortgages where people were getting these ‘amazing’ interest rates and not knowing, or not understanding, that the rate will be adjusted in 5 years and they may well not be able to afford the new payment. Even worse if they didn’t know, or didn’t understand, that part of the reason for the low payment was because they were only paying interest (and property tax escrow and/or other fees) so when the loan is up for renewal, they still owe the same amount as they did at the beginning of the mortgage, but now their payment is considerably higher. Add to that the fact that house prices were dropping so selling the house wasn’t always an option.
Extended mortgage periods depend on several factors, including interest rate, the deductability of interest, and whether families expect their children to stay in that home. Extremely long mortgages exist already elsewhere.
Amortization periods in most countries range between 20 and 40 years, although a few - primarily in Europe - have 50- and 60-year mortgages and some countries even feature 100-year mortgages, designed to be intergenerational.
Back in the 90s, Japan’s housing bubble made mortgages hit the 100-year mark.
That doesn’t mean that 50-year mortgages make any sense in the U.S. of 2025. Conditions are not that extreme and the likelihood of millions of intergenerational families in one home is diminished if not gone. Trump is desperately throwing everything at the wall to see what sticks. Nothing, so far.
With a 50 year mortgage people will be able to spend more on a house for the same monthly payment, so the result will be that buyers will be less price sensitive and housing prices will go up even further in what is already a tight housing market.
That was exactly what I was referring, yes. Sorry if I didn’t make it clear, so here’s one reference for those not following along (this is just ONE type, a very extreme variant, though there were many balloon options at the time referenced)
Yes.
U.S. lenders can offer 50 year mortgages now. But my web search shows they do not. There are a couple reasons for this. One is that some government programs have a 30 year limit. But the big reason is probably that a 40 year loan, which is available, typically involves only paying interest. At the end of the 40 years, there is a balloon payment that you may be able to pay off with savings (mentioned in last post). Or I guess you can get a new mortgage if still working and young enough. Here is how it usually works:
https://www.rocketmortgage.com/learn/40-year-mortgage
A 50 year Trump mortgage, if set up like a 30 year mortgage, would have a higher monthly payment than a 40 year mortgage.
Trump’s plan is DOA.
EDITED: I should not have mentioned age above. Mortgage approval age discrimination is illegal, although I guess if they give big enough GOP campaign contributions, risk to the lender is low..
Putting all the logic above aside, a 50-year mortgage makes perfect sense, … to Trump.
He has no idea of the real world, nor does he care. It’s all about him, riding in on his white horse and his believers will just believe. That corporate America will reap enormous economic benefits is what makes this scary and dangerous.
Corporate America can offer nonconforming 50 year mortgages today. Most loans for more than $800,000 are non-conforming, so this is not outside their experience.
If there were enormous economic benefits for corporate America, it would already be a commonly advertised product.
My guess is that some deep red state banks will start marketing 50 year Trump loans, but they’ll write so few it will hardly be worth it to them.
To me, when I hear people start pushing exotic mortgage products, we’re less than 2 years away from a banking crisis.
Reasons why Trump’s idea is bad:
- It doesn’t encourage home ownership (which is good) so much as home indebtedness (which is bad).
- It won’t make homes more affordable. Remember what jumbo student loans did to tuition prices? Same principle for houses. Adding leverage without adding capacity means they’re going to get expensive, a lot more expensive.
- It won’t help people who can’t get loans anyway due to bad credit.
- Equity will build so slowly that a lot of people will be tempted to just walk away if they can’t pay the mortgage. Easy credit plus high incentive to default – hello systemic risk!
The right solution to the housing squeeze is… wait for it… to build more housing. A sound lending policy might be government-backed zero-interest loans for construction of qualified residential housing. You get favorable terms for building, not for buying.
We can’t borrow our way out of the housing squeeze, we can only build our way out of it.
Lots of people die with mortgages unpaid (I’m going to), that’s not a problem for the banks unless the house is underwater (a rare occurrence most of the time, but who knows what wonders Republican economics holds for us in the future). The heir inherits the equity, can either keep paying on the existing mortgage or re-finance (if they qualify) or sell and take the equity, or if all that fails the bank will repossess the house and sell it, almost certainly for more than the remaining amount owed.
This plan might make it slightly easier to get into home-ownership for first-time buyers, but only if it comes with low down payments and other similar incentives. It’s definitely better for the banks, over the long run. Like many voluntary options, a 50-year mortgage may look more attractive to many people than it really is, and they could end up placed badly for their future economic well-being.
It also reminds me of all the messes that banks can create by packaging and trading mortgages. I don’t know what they would come up with under these conditions, but it will probably be bad for everyone except the banks.
eta: I did not intend these remarks to be in answer to PhillyGuy, not sure how that happened.
Not so fast. I live in an older suburb, and a lot of our “older” (pre-1980 or so) housing stock has been knocked down to make room for half-million dollar McMansions. The lack of older, smaller and cheaper housing has put an end to the concept of starter houses for younger couples.
Googling this, I do not see interest on the part of the real estate or lending industry.
Is there any chance the Trump Organization wants to jump into home lending?
Trump foreclosing on his supporters seems too much of a Democratic dream to ever come true. But if he plans to actually vacate the White House in January 2029, maybe it is his kind of grift.
Because only the least qualified borrowers would opt for this, I do expect that if 50 year loans come to be a reality, we are going to see foreclosure headlines.