The Trump administration
The interest paid for a 50-year mortgage on a $500,000 loan with a 6.10% annual percentage rate, roughly the current average for a 30-year fixed-rate mortgage, would total more than double the price of the loan at $1.1 million, according to LendingTree.
Comparatively, the total interest paid on a 30-year loan with the same APR would come out to $591,000 while paying just $361 more a month. The interest paid on a 15-year loan would be $264,000 on monthly payments of $4,246, about $1,200 more per month than the 30-year loan.
"It is kind of a half-baked idea to get the general public thinking, 'Oh, that's great," and then it actually doesn't help affordability when you look at the numbers at all," said Robbie Chrisman, host of Daily Mortgage News, on the Mortgage Matters: The Weekly Round Up show Wednesday.
The difference becomes even more stark when applying a 7% APR, roughly the average rate at the start of the year. The interest paid on a 50-year loan would total $1.3 million, compared to $698,000 for a 30-year loan and $309,000 for a 15-year loan, while monthly payments would be $3,008, $3,326 and $4,494, respectively.
A 50-year mortgage would likely face higher interest rates as well.
The 50-year loan would not make sense for anybody other than the mortgage holder due to the sheer amount of accumulated interest, said Dan Sugg, chief mortgage lending officer at Michigan First Credit Union, on Mortgage Matters.
A 50-year mortgage would also hinder homeowners' ability to build equity, as the early years of any mortgage is spent paying more toward interest than the original loan balance.
For a 50-year mortgage on a $500,000 loan with a 6.10% APR, a borrower would have only paid about $21,000 of the original balance in 10 years, just 4.2%. Meanwhile, a borrower would have paid more than $80,000 on a 30-year mortgage, about 16% of the original balance.
By the time the 30-year mortgage is completely paid off, the borrower with the 50-year mortgage would have paid off only 26% of the original balance.
A 50-year mortgage would also put the homeowner at a higher risk to be underwater on a loan, meaning they would owe more than the house is worth, LendingTree said.
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