Ramsey Expert Calls Trump’s 50-Year Mortgage a ‘Horrible Idea’ — 3 Experts Weigh In

Commitment to Our Readers

GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.

20 Years
Helping You Live Richer

Reviewed
by Experts

Trusted by
Millions of Readers

Becoming a homeowner isn’t easy when the average sales price of houses in the U.S. is $512,800, according to the Federal Reserve Bank of St. Louis. Between high principal balances, interest rates, insurance, taxes and other fees, those monthly mortgage payments aren’t always affordable.

To address this issue, President Donald Trump proposed the idea of a 50-year mortgage. While there may be some merits to this idea, many experts agree that this isn’t a real solution to the housing affordability crisis. “The Ramsey Show” co-host Ken Coleman even called this a “horrible idea.”

Here’s why — and find out if other experts agree.

A Game Changer for Banks

The Federal Housing Finance Agency Director, William Pulte called the 50-year mortgage a “complete game changer,” as reported by NPR.

But Ken Coleman argued it’s a game changer for banks, not the people. Why? Because of interest.

Fox Business estimates the monthly payment on a fixed-rate $400,000 mortgage would be as follows (excluding taxes, insurance and other fees):

• $2,038 on a 30-year loan (principal plus interest)
• $1,891 on a 40-year loan (principal plus interest)
• $1,822 on a 50-year loan (principal plus interest)

But as Coleman points out, there’s only about a $200 savings ($216 to be precise) between a 30-year loan and a 50-year loan. The trade-off for this savings is more time in debt, the risk of passing that debt on to your heirs and slower home equity growth.

Even though the principal loan is the same regardless of repayment term, longer terms tend to cost more in overall interest. As Coleman put it, that interest is front-loaded. Most of those monthly payments will go toward the interest (i.e. the bank) than the principal balance for longer.

Typical interest rates for 30-year fixed-rate mortgages are around 6.26%, according to the Federal Reserve Bank of St. Louis. Assuming the same interest rate applies to a 50-year mortgage, here’s an example of what buyers might pay on two otherwise identical loans ($400,000 principal).

• 30-year loan: $887,570 in total ($487,570 in interest)
• 50-year loan: $1,309,726 in total ($909,728 in interest)

The 50-year loan would cost nearly double the 30-year loan in interest charges. Know that longer repayment terms often come with higher interest rates. A 15-year mortgage, for example, has a typical 5.54% rate (0.72% lower than a 30-year loan), per the Federal Reserve Bank of St. Louis.

Given how much debt Americans already have and only $200 a month in savings, Coleman doesn’t think it’s worth the price.

A Cosmetic Solution

Daniel Ickowicz, broker and CEO of Elite International Realty, called the 50-year mortgage a “cosmetic solution” as opposed to a “structural one.”

“Yes, it improves monthly affordability on paper, but at the cost of a massive long-term interest. It can also push prices higher by artificially expanding what buyers ‘can afford,'” Ickowicz said. “The only real upside is for long-term investors who care about cash flow, not equity build-up.”

If the goal is to help people buy their first home, Ickowicz suggested other possible solutions that may be better. These include federal incentives around construction, down payment support and zoning modernization.

The Matter of Equity

Michael Micheletti, housing and home equity expert with Unlock Technologies, suggested a 50-year mortgage might solve some problems, but not all. It depends on the problems you’re trying to solve.

“If it’s affordability, a 50-year mortgage is not the answer. On the contrary, it potentially puts the prospective homebuyer in more harm in the outer years of the engagement with the mortgage provider,” Micheletti said.

Again, it comes down to the numbers. The median age of first-time homebuyers is 40, as per the National Association of Realtors (NAR). A 50-year mortgage means staying in debt until the age of 90 — assuming no prepayment.

This can limit a family’s ability to build generational wealth.

“We know that home equity is very valuable,” Micheletti said. “We recently surveyed homeowners and found that 60% view their equity as an added layer of financial security. Reducing the possibility of that equity has consequences — especially in this economy.”

Home equity gives retirees in particular more options and hope, according to Micheletti. For example, it might mean putting their kids through college or leaving behind a legacy. A 50-year mortgage slows down equity, potentially for a very long time.

There Are No Guarantees

Jason Iacovelli, senior loan officer at reAlpha Mortgage, said a 50-year mortgage isn’t necessarily good or bad.

“It’s either right for someone or it isn’t,” he said, “and that’s entirely predicated on the consumer knowing what questions to ask themselves.”

A 50-year term could save people money, but a marginal amount — calculations run anywhere from $100 to $350. This doesn’t necessarily account for the increased interest rate that comes with longer-term loans.

“I know, I know. $100 is $100. That could be a huge difference for some families,” he said. “But this is only kicking the can down the road. You’re saving $100 to be able to buy a house you basically can’t afford while ignoring the fact that they’re not going to be paying down much of anything for the first decade.”

He provided the following examples:

• On a $500,000 mortgage with a 6% interest rate and a 30-year term, it’ll take roughly 19 years before the principal portion of the monthly payment is higher than the interest.
• Stretched over 50 years with a 6.5% rate, you save approximately $180 a month. But it’ll take around 39.5 years for the principal portion to outweigh the interest.

Of course, if you’re investing in real estate, this could be a good thing, he said. But if you’re likely to move as many homeowners do — usually by year eight to year 13 — you might not come out as ahead as you think. Plus, you’re banking on that property appreciating consistently and at a reasonable rate over time.

“Appreciation can’t be argued against but if you can’t count on it, you can only deal in what you know and that’s amortization and the hope that your home won’t decline in value,” Iacovelli said.

The longer term could work out, but there aren’t any guarantees.

Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.

Share This Article: