The Donald Trump administration on the 9th (local time) formalized a plan to extend the maturity of mortgage loans to up to 50 years. The stated aim is to revive a housing market frozen by sky-high home prices and steep interest-rate barriers and to support the "American Dream" for young people. But controversy is intensifying, with warnings that trying to save a few dollars a month could become a "liability trap" that leaves people in debt for life.
Bill Pulte, Administrator of the U.S. Federal Housing Finance Agency (FHFA), said on social media X (formerly Twitter) on the 9th, "Thanks to President Trump, we are actually working on 50-year mortgages," adding, "This will be a complete game-changer." President Trump also shared on social media an image comparing himself side by side with Franklin Roosevelt (FDR). President Roosevelt introduced the 30-year mortgage in the United States during the Great Depression of the 1930s, ushering in an era of middle-class dwellings ownership. Trump claimed the 50-year mortgage now being pursued is a core dwellings pledge on par with FDR's policies at the time.
As with mortgage loans in Korea, the mortgage is the standard method used in the United States when buying a house. In fact, 90% of U.S. homebuyers use the 30-year fixed-rate mortgage introduced during President Roosevelt's tenure. The 50-year mortgage the Trump administration is currently pushing would drastically extend this 30-year formula by 20 years to 50 years, lowering the monthly burden of principal and interest (principal + interest).
U.S. real estate experts see the current dwellings market as having fallen into a complete deadlock. As the Federal Reserve, the U.S. Central Bank, has raised rates to rein in inflation, the 30-year fixed mortgage rate that serves as the benchmark for U.S. mortgage loans has stayed above 6% annually for more than three years.
With home prices soaring and the burden of loan interest growing, sentiment for buying a new home has frozen rapidly. According to real estate data firm Redfin and others, U.S. households are currently pouring about 39% of their monthly income into mortgage payments. A recent report by the National Association of Realtors (NAR) shows the average age of first-time dwellings buyers reached 40.
In particular, existing dwellings owners who borrowed at ultra-low annual rates in the 2%–3% range during the pre-2022 pandemic period are not selling, drying up listings. If they sell now and move to a new home, they would have to shoulder rates above 6% instead of 2%–3%. Both prospective buyers and sellers are stepping back because of interest.
Pulte, the FHFA Administrator, said on X, "We are putting our efforts into guaranteeing the American Dream for young people," emphasizing, "The 50-year mortgage is a key tool among the broad solutions we have in mind."
According to real estate investment analytics firm Norada, if you purchase a $400,000 dwellings with a 6.25% mortgage rate, the monthly payment on a 30-year term is $2,463. By contrast, on a 50-year term it falls to $2,180. The monthly payment burden drops by $283, or about 12%.
However, the total repayment would require about $420,000 more in interest. For a $400,000 dwellings, the total interest on a 30-year mortgage is about $487,000. By contrast, total interest on a 50-year term swells to $908,000. To save 390,000 won a month, you would have to pay more than $421,000 in interest over the extra 20 years.
In the United States, a house is more than just a place to live; it is the most important means of building assets. But with a 50-year mortgage, most of the money paid early goes to interest. The longer you pay, the higher the share that goes to principal. Extending 30 years to 50 years makes the pace of building my equity in the home extremely slow. According to Norada's analysis, with a 30-year loan, in about 18 years half (50%) of a $400,000 home's value becomes my asset. But with a 50-year mortgage, it takes 28 years to make 50% of the home value net worth.
Because net worth accumulates slowly, some point out there is a high risk of falling into "negative equity" if the dwellings market contracts and home prices fall, where the loan balance exceeds the home value. In that case, as in the subprime mortgage crisis of the 2000s, there is a higher likelihood that many users of 50-year mortgages could fall into default.
For this reason, Americans' response to the 50-year mortgage is generally chilly. Real estate investor Graham Stephan wrote on X, "You are nearly doubling the repayment schedule in exchange for saving 10% on the monthly payment," adding, "It makes almost no financial sense. It can never end well."
Even hard-line Republican lawmakers considered close to President Trump have mounted open resistance. Rep. Marjorie Taylor Greene of Georgia wrote on X, "This policy is something only banks, mortgage lenders, and home builders want," adding, "The vast majority will pay much more interest than before for life and die before they even finish paying off the home price."
Richard Green, a professor at the University of Southern California (USC), said, "The longer the loan term, the greater the lender's risk," adding, "Just as the 15-year rate is lower than the 30-year rate, the 50-year rate will be set higher than the 30-year." In that case, the monthly payment savings from using a 50-year mortgage instead of a 30-year mortgage becomes even more negligible.