- A recent proposal for a government-backed 50-year mortgage has sparked intense debate among politicians and the public.
- Economists suggest the idea isn’t as radical as it seems, drawing parallels to the widely accepted 30-year mortgage.
- The primary benefit would be lower monthly payments, but this comes at the cost of significantly more interest paid over time and slower equity growth.
- Experts agree that such financial products don’t address the core issue of housing affordability, which stems from a lack of housing supply.
A proposal recently floated by former President Trump to create a government-backed 50-year mortgage has ignited a media firestorm, with critics arguing it would saddle Americans with “generational debt.” However, some economists suggest the idea may not be as outlandish as it first appears.
Is a 50-Year Loan Really That Different?
While the thought of a half-century of debt is daunting, financial experts point out that it’s not a radical departure from the current standard. “It’s not obviously so different from a 30-year fixed mortgage,” said Eric Zwick, an economist at The University of Chicago Booth School of Business.
The reality is that most American homeowners do not see their mortgage through to the end. According to Redfin, the typical homeowner stays in their home for less than 12 years before selling or refinancing.
“Most people will not have that 50-year mortgage product for that length of time,” noted Daryl Fairweather, chief economist at Redfin. In practice, a 50-year loan would simply be another option on the menu for homebuyers, potentially serving as a temporary solution before they refinance into a different product later.
Lower Payments vs. Higher Costs
The main appeal of extending a loan term from 30 to 50 years is a reduction in the monthly payment, which could help more buyers overcome the affordability hurdle. “A longer duration mortgage is gonna lower the monthly payment,” Zwick explained.
However, this benefit comes with significant trade-offs. A 50-year mortgage means paying far more in total interest over the life of the loan. It also means homeowners build equity at a much slower pace, as a larger portion of their initial payments goes toward interest rather than paying down the principal balance. These are the same drawbacks present in a 30-year mortgage, just amplified.
Not a Fix for the Real Problem
Economists universally agree that while new financing options might help some buyers at the margins, they do not solve the fundamental problem driving the housing crisis: a severe lack of supply.
Injecting more demand into a market with a fixed number of homes for sale can have the unintended consequence of pushing prices even higher. “The main beneficiaries are actually the people selling houses,” said Harvard University economist John Campbell. “Because given the supply, if you make it easier for buyers, they’re bidding against each other for the same supply. The price is gonna go up.”
Ultimately, the consensus is clear: the most effective way to improve housing affordability is not through financial engineering, but by building more homes to meet the growing demand.
Image Referance: https://www.npr.org/sections/planet-money/2025/11/18/g-s1-98040/is-a-50-year-mortgage-really-that-much-crazier-than-a-30-year-one