David Vance SubstackRead More
I usually agree with about 99% of what President Trump says but this is part of the 1% that I dissent from; Hear me out before judging me!
U.S. President Donald Trump has downplayed efforts to offer a 50-year mortgage as a way to make owning a house more affordable than with typical 30-year loans, even as homeowners would pay far more in interest and take longer to build equity. “All it means is you pay less per month. You pay it over a longer period of time. It’s not like a big factor. It might help a little bit.”
WRONG. WRONG. WRONG.
Owing your home is something that we should all be able to achieve but whilst a 50-year mortgage—a home loan with a 50-year repayment term—may seem appealing due to lower monthly payments, but it carries several significant dangers. It seems to me that Trump is downplaying these.
With such a long loan term, buyers pay massively more in total interest over the life of the mortgage. Borrowers can end up paying double or more the original amount borrowed. How is that a good deal?
Homeowners build equity much more slowly. This makes it harder to refinance, move, or borrow against the home for other needs.
No matter how you look at it, committing to 50 years of payments comes with much greater life uncertainty. Job loss, health issues, or major life changes can occur well before the mortgage is paid off, increasing the risk of default.
Then events like the 2009 property collapse can happen when property values fall, homeowners may owe more than their house is worth for a much longer period, especially in the early years of the loan. This happened to a close relative so it is a risk!
Borrowers may still have a mortgage long into retirement—sometimes well into their 70s or 80s—making it difficult to live on a fixed income or downsize as needed.
Many 50-year mortgages are interest-only for the first decade or so, meaning you don’t pay down the principal, just the interest. This delays substantial equity even more.
If a homeowner dies before the mortgage is paid, heirs could inherit debt instead of property
Yes, there is an “affordability” crisis when it comes to housing but the answer is not 50 year mortgages. It is mass deportation. House prices are subject to the iron law of supply and demand so just as long as allow MILLIONS of migrants into our country then the property supply will never be adequate.
That’s why property prices keep rising and 50 year mortgages are just a distraction.
