You may have heard the news already, but maybe not. 50-year mortgages are on the table now.

Trump has apparently been floating the idea of giving home buyers the option to pay off their mortgage in 50 years instead of the standard 15- or 30-year periods. 

Is that good or bad for the housing market, and will it help or hurt would-be homeowners (and sellers)? Let’s talk about it.

In today’s issue:

✅ Are 50-Year Mortgages Helpful Options or Interest Traps?
✅ A Real-World Example Comparing 15-, 30-, and 50-Year Options
✅ How Would 50-Year Mortgages Affect the Housing Market?

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Let’s address something key right off the bat. A 50-year mortgage will lower your monthly payment by $100 to $200, which is nice and “more affordable.” 

But because of the 20 extra years of interest vs. a 30-year loan, you would end up paying hundreds of thousands more in interest payments.

Here’s an example. Let’s say you’re buying a $500K home and you’re deciding between a 15, 30, and 50-year mortgage. We’ll say that all three of the loans are at a 6.5% interest rate (in reality they’d be slightly different, but for the sake of simplicity, we’ll make them the same). Here’s how much you’d pay in interest with each $500K loan option:

15-year mortgage interest: $283,996.63

30-year mortgage interest: $637,722.44

50-year mortgage interest: $1,191,150.66 😂

That means a 50-year mortgage costs almost twice as much interest as a 30-year loan and over four times as much as a 15-year loan.

But yeah, your monthly payments would be $100 or $200 less if you do the 50-year option. Take your pick.

Don’t get us wrong, we’re not making fun of people who would benefit from saving a couple hundred dollars each month; that’s a significant amount of money. What we’re trying to highlight is that a 50-year mortgage is NOT going to help you build wealth. It will keep you “renting from the bank” for half of your life, syphoning your money for decades.

What’s more, because of how the amortization schedule works, it would take you about 40 years of payments to reach 50% ownership. That’s right… 18 more years of payments than it would take with a 30-year mortgage.

Look at it this way: would you rather pay ~$1.2M in interest over 50 years, or ~$284K in interest over 15 years (and invest the $900K you saved in stocks, a business, or another home)? It’s an easy choice for us personally!

It’s clear that a 50-year mortgage wouldn’t help you build wealth quicker; in fact, they can’t really “help” homeowners much at all in the truest sense. But what would introducing 50-year loans do to the housing market?

We aren’t financial advisors, but in our opinion, 50-year mortgages would be terrible for home buyers. Why? Because they would drive home prices UP in a time of record-high housing prices.

It’s just simple supply and demand. Housing is scarce right now as it is, and buyers have been competing for the same homes. If 50-year mortgages are rolled out, they would increase access (read: demand) to home loans, because more people would be able to afford the cheaper monthly payments. That might sound like a good thing, but what happens when demand increases but supply stays the same?

You guessed it. Price goes up!

So, in summary, here’s what would probably happen if 50-year mortgages are introduced:

So if 50-year mortgages become a thing, we’re left in an economy where houses are EVEN MORE expensive, banks are even richer, people are spending more on housing than before, and people are building wealth much slower.

Seems bad. 

Our thoughts? We’ll stick with the 15-year mortgage, thank you!

Home ownership is a huge goal for many people, and we think that’s great. However, we also think that there’s a smart way and a… not-smart way to go about it. (The 50-year mortgage is the not-smart way.) 

This is not financial advice, and you should do your own research, but those are our own thoughts and opinions about the matter. Hope you learned something, and let us know if you have any hot takes about the housing market!

Cheers to getting 1% better each week! 🥂

We’d love to hear about it—and your response could help someone else with their home purchase journey.
Just reply to this email.

Thanks for reading,
—Your friends @ Future Funders 🍽️

P.S. Forward this to a friend who’s stoked about the 50-year mortgage. 😁