Estimated read time: 2-3 minutes
- The Trump administration proposes 50-year mortgages to make homes more affordable.
- Experts warn these mortgages increase total interest, making homes less affordable.
- A 50-year mortgage may cost $456,426 more in interest than a 30-year loan.
SALT LAKE CITY — The Trump administration has an idea it says will make homes more affordable: 50-year mortgages. But some personal finance experts warn that stretching a loan from 30 to 50 years will do the opposite and make homes less affordable.
In the Wasatch Front and in St. George, the median sales price of homes has shot way above the $500,000 mark. Now, to lower monthly payments and to bring more buyers into the market, the president is suggesting 50-year mortgages. His administration calls it a "game changer."
Personal financial adviser Shane Stewart of Deseret Mutual Benefits Administrators believes it will change the game. But not in a good way.
"This proposal is really a short-term fix that can create long-term problems, especially for the individual," Stewart said.
He said, yes — a 50-year mortgage will lower the monthly payment by a couple of hundred dollars, maybe. However, the interest you'll pay is going to be a staggering amount.
"You can pay up to double what you would pay in interest over the life of that loan," said Stewart.
The median sold home price in Salt Lake County is currently $545,000. A 30-year loan at the current average rate of 6.22% with 20% down will cost you $3,051 monthly. The total interest alone is $527,369.
Now, let's add 20 years at the same interest rate, though in reality, it'd most likely be higher since longer loans pose longer risks for lenders. That monthly payment is $2,741 — a drop of $310.
But you're going to pay $983,795 in total interest. That's $456,426 more in interest than the 30-year option.
Stewart said for many buyers, that extra 20 years means they'll always owe on their home but never actually own it.
"It behooves you to own something," he said. "Real wealth is built when you own something."
Stewart also said a half-century loan builds equity far slower since a lot more payments are going toward interest alone. Where it might make sense, he said, is if you plan to refinance into a 30-year or shorter loan as soon as interest rates drop.
