The 50-Year Mortgage: Exciting or Exhausting?
So tell me, are you excited about the possibility of a 50-year mortgage?
In my opinion, this won’t make housing more affordable. In fact, it could make homes far more expensive to own in the long run. There’s been no talk of a lower interest rate for a 50-year mortgage. Traditionally, the lowest rates are on 15-year loans, then slightly higher for 30-year loans.
I was curious about what it might look like for someone buying a house today with a 50-year loan compared to a 15-year or 30-year fixed mortgage.
The Numbers
Here’s the data I started with:
Median home price: $410,800 (half of homes in the U.S. sell for more, half for less)
Fixed interest rates:
-
15-year: 5.58%–5.66%
-
30-year: 6.22%
-
50-year: 6.22% (and 6.88%)
These calculations assume no down payment and no closing costs, homeowner’s insurance, or property taxes — just the $410,800 loan amount.
| Loan Type | Monthly Payment | Interest Paid Over Time | Total Paid |
|---|---|---|---|
| 15-Year | $3,391.56 | $199,680.51 | $610,480.51 |
| 30-Year | $2,521.36 | $496,885.80 | $907,685.80 |
| 50-Year (6.22%) | $2,229.56 | $926,918.24 | $1,337,718.24 |
| 50-Year (6.88%) | $2,434.07 | $1,049,649.85 | $1,460,449.85 |
I calculated the 50-year option using the same interest rate as the 30-year loan, just for argument’s sake, since there’s been no mention of lowering the rate. (And as we know, the longer the loan, the higher the interest usually climbs). I also calculated at a rate .66 higher which the difference between a 15-year and a 30-year loan.
So what’s the actual monthly savings? A buyer could save $102.87 per month at 6.88% or $306.95 per month at 6.22%.
The “Tipping Point”
To see how this affects equity, I looked at the tipping point, the moment when the principal portion of your payment finally exceeds the interest portion each month.
| Loan Type | Tipping Point | Interest Paid to Date | Principal Balance Remaining |
|---|---|---|---|
| 15-Year | Year 3, 9 mos. | $60,137.20 | $357,317.52 |
| 30-Year | Year 19, 10 mos. | $402,122.40 | $241,863.88 |
| 50-Year (6.22%) | Year 39, 10 mos. | $829,545.92 | $213,685.43 |
| 50-Year (6.88%) | Year 40, 10 mos. | $952,147.69 | $211,981.12 |
So yes, year 40 before the scales finally tip in your favor on a 50-year mortgage.
My Take
What I see here is that a 50-year mortgage makes far more money for lenders.
Would it be wiser to rent (depending on local rental prices) and invest the difference in mutual funds? Maybe that sounds like a privilege question, but I personally hate paying interest and avoid it whenever I can or at least try to find the best deal possible.
I also wonder how this will affect people’s ability to “buy up” over time. Most folks I know start with a smaller home, build equity, then sell and use that equity to move up or downsize. With a 50-year loan, that process could take decades - if it happens at all.
Expert Opinion
Since I’m not a real estate expert, I called someone who is: my friend and California real estate agent, Susan Bovey.
We chatted about my concerns, and she agreed, a 50-year mortgage isn’t a great path for people trying to build equity. Susan’s also skeptical that the idea will ever get much traction. Still, she’s hopeful that if it does, lenders and agents will be upfront about how 50-year financing really works.
She added that for buyers not focused on equity and planning to stay in a home for only five to seven years, the $100–$300 monthly savings could make sense.
Final Thoughts
So if you’re thinking a 50-year mortgage might finally make homeownership possible for you, do your homework first.
And if you live in the Sacramento, California area and are looking to buy or sell, call Susan! (I’m happy to give you her number if you private message me.)
No comments:
Post a Comment