Trump is proposing a 50-year mortgage, but some say the savings for homeowners would be minimal
In another attempt to make home buying more affordable, President Donald Trump floated the idea of a 50-year mortgage in a social media post. In response, Federal Housing Finance Agency Director Bill Pulte, who oversees Fannie Mae and Freddie Mac, posted that they were “working on it” and that it would be “a complete game changer.”
The purpose of a longer term mortgage would be to lower the monthly payment for the home owner. The longer the loan term, the smaller the principal required each month to pay it off in full. But such a plan has other compromises.
Using the most recent median home sale price in September, $415,200, according to the National Association of Realtors, and a current interest rate of about 6.3%, according to Mortgage News Daily, for a 30-year fixed loan with a 20% down payment, the monthly payment for principal and interest alone would be $2,056. If you increase the term to 50 years at the same interest rate, that payment will be $1,823, a savings of $233 per month.
However, homeowners would not build equity as quickly because their principal payments would be lower. The amount of interest paid to creditors would be 40% higher.
How could it work
The real question is whether Fannie and Freddie can do it. Analysts say it’s possible, but the 50-year mortgage doesn’t currently meet the definition of a qualified mortgage under the Dodd-Frank Act, which provides investors with a backup from Fannie and Freddie if the loan goes bad. However, regulators have been given the power to change this to ensure mortgage affordability. But that could take up to a year, given the need for congressional approval, according to Jaret Seiberg, financial services and housing policy analyst at TD Cowen.
“Fannie and Freddie could establish a secondary market for 50-year mortgages before the policy changes. They could even buy mortgages for their portfolios. However, this would not change the legal liability of lenders. Therefore, we believe that lenders will not originate 50-year mortgages without changes to the QM (qualified mortgage) policy,” Seiberg wrote in a note to clients.
How would that affect rates
Then there is the matter of the mortgage rate. According to the Mortgage Bankers Association, the average rate for a 15-year fixed mortgage is currently 66 basis points lower than the rate for a 30-year fix. This would mean that the rate on a 50-year fixed would be higher. It all depends on the demand of the investors for the product.
“There is currently no secondary market for such loans, and it will not be possible to build a strong secondary market in the foreseeable future,” Matthew Graham, chief operating officer of Mortgage News Daily, said. “This means that in addition to the extremely low principal amount paid in the earlier years of the loan, interest rates would also be slightly higher than 30-year loans – a double whammy for those with any hope of building equity.”
Graham said that for all practical purposes, the loan would be more like an interest-only loan because very few people would keep their home for 50 years. Homeowners could still gain equity through home price appreciation, but prices across the country have softened quickly this year, with appreciation nowhere near that of previous years.
How does this affect affordability
Even real estate agents agree that the savings for homeowners would be minimal.
“This is not the best way to address housing affordability. The administration would do better to reverse the tariff-induced inflation that is keeping existing mortgage rates high,” Joel Berner, chief economist at Realtor.com, wrote in a report.
Others note that this new mortgage product would likely depend on the government’s Fannie Mae and Freddie Mac remaining in receivership. The Trump administration has said both will be taken private and then have an initial public offering sometime in the near future.
“The adoption of a 50-year mortgage product could complicate the path to privatization for Fannie Mae and Freddie Mac,” analysts at Evercore ISI wrote in a note to clients. “That said, we understand that the administration expects the GSEs to remain in administration after it sells a roughly 5% stake to the public. That would allow the administration to maintain control of the GSEs for the foreseeable future.”
Home affordability has been a major push for the Trump administration. Historically low interest rates in the wake of pandemic economic policies have created a historic housing boom that has catapulted home prices more than 50% higher in just five years. Home sales weakened dramatically as a result, as did demand for mortgages.
The average age of the typical first-time buyer in 1991 was 28. By 2024, it has reached 38, according to a report by the National Association of Realtors, whose deputy chief economist called the number “shocking.”
The Trump administration is urging builders to build more homes to lower prices, saying they are sitting on a surplus of vacant lots. Builders protest this claim and continue to cite high costs for land, labor and materials.
On the company’s latest earnings, PulteGroup CEO Ryan Marshall said he agrees with the president’s perspectives as it relates to the undersupply of roughly 4 million homes for sale, but added, “While this supply shortage certainly has an impact on affordability in general, the complexity of the new home construction industry dictates that addressing a problem of this magnitude requires a coordinated and comprehensive approach that brings together federal, state and local construction industry officials.”