The Trump administration is working on a plan for a 50-year mortgage. The internet was abuzz this weekend when FHFA director William Pulte Jr. confirmed the rumor. The Federal Finance Housing Agency director suggested it would be a game changing moment for the housing market. President Trump floated the idea on his Truth Social account.

The administration is floating the idea of a 50-year mortgage to stimulate a sluggish housing market. We should probably not be surprised by the idea of two wealthy real estate guys grasping at straws to stimulate home sales and credit (aka debt) growth. The disappointing part is that the the current FHFA director has spent most of the year talking up his work to improve affordability in the housing market.

It turns out that actually lowering costs and improving housing affordability is a lot more difficult than talking about it. That (improving affordability) would require more patience and concrete policies designed to put people in homes instead of feeding a financialization machine.

How a 50-Year Mortgage Works Against You

Instead we’re getting a ridiculous charade of housing affordability with a 50-year mortgage. Swapping a traditional 30-year mortgage for a 50-year loan term could double the amount of interest you pay. For a typical DFW home of $500,000 and a 20 percent down payment, a borrower is looking at an additional $400,000 in interest charges over the life of the loan.

Is it really worth it to lower your monthly payment by less than $300 per month to pay an additional $400,000 in interest charges? Of course not. But this is the beauty of finance. Both Pulte and Trump are probably hoping you are dumb enough to ignore your ammortization schedule. Any prudent borrower who does would see how interest charges are front-loaded toward the first half of a mortgage.

What is this important? By switching to a longer 50-year mortgage you are basically destroying the potential to build equity in your home. The attached graphic shows how your equity barely budges in the first 5 years of a 50-year loan term. Even at the 10-year mark, you are barely making a dent on that principal. This is by design!

While some proponents will point to the idea of re-investing savings in the market, that comes with a load of risks. Can you spell volatility? What the administration is really proposing here is a poorly-timed gimmick to encourage more risky behavior. A 50-year mortgage doesn’t improve housing affordability. It would make it worse by propping up prices.

At the end of the day a 50-year mortgage will likely be a big nothing burger. Few people will be desperate or dumb enough to take out a 50-year note on a home so they can yolo in the market.

The Housing Market is Healing – It Just Needs Time

The housing market is still working to heal. The normalization process is working as it should. While mortgage interest rates are still hovering around the six percent mark, prices have continued to soften this year. Inventory has come back to the market.

More stimulus is the LAST thing the housing market needs right now. Employment stability and steady wage growth would be much better for long-term housing market health.

Median home prices in Denton County are down 7.9 percent from October of last year. Average prices were 4.7 percent lower. Median home new home prices in Denton County were 12.8 percent lower than a year ago. That would help to explain why Pulte Jr. is keen on the idea of a 50-year carrot for his home building industry friends.

Area home sales were roughly flat in October. Pending sales were down 7 percent from October of last year. North Texas home sales volumes bottomed about a year ago. They have been moving in the right direction with more plentiful inventory. Apparently the improvement in sales activity has been two slow for those in charge.

If you are in the market to buy or sell a North Texas home, give me a call. I would be happy to assist you.

If you find yourself contemplating the idea of a 50-year mortgage to buy a home, please don’t. You are better off renting.

There’s no need to sign up for indentured servitude when there are plenty of temporary (and affordable) housing options available to you.