50-Year Mortgage Idea Falls Flat
Bill Pulte, the current Federal Housing Finance Agency director, floated the idea of introducing a 50-year fixed-rate mortgage last week on social media. However, that may not be a viable solution to affordable housing.
This might be a case where the "cons" outweigh the "pros." While payments spread out over 50 years may offer a slightly lower monthly cost, the amount of interest paid over this extended period would be exorbitant. A homeowner with a 50-year loan would not begin to build equity until the 40th year of making payments. So, this rather defeats the idea of building wealth through equity.
Additionally, the Dodd-Frank Wall Street Reform and Consumer Protection Act does not permit the government to create a 40- or 50-year mortgage. Changes to this bill would have to go through a legislative process and be approved by Congress. That being said, it’s unlikely this idea will take shape any time soon.
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