The Trump Administration Plans to Introduce 50-Year Mortgages. Here’s What That Would Mean for Home Buyers

TIME

The Trump Administration is working to introduce 50-year mortgages for home buyers—a plan that has drawn criticism even from some of the President’s allies, and that experts warn could come with potentially major drawbacks.

Transcript

00:00President Trump announced that his administration is working on a plan to introduce 50-year

00:04mortgages for homebuyers. But the plan has drawn criticism even from some of the president's

00:08allies, and experts warn it could come with potentially major drawbacks.

00:12Experts say the monthly payments for a 50-year mortgage would be lower than those for a 30-year

00:17mortgage. However, there are drawbacks. One being a 50-year mortgage would take homebuyers longer

00:23to pay off their debt. Another is that, most likely, the interest rate for a 50-year mortgage

00:27would be higher than that of a 30-year mortgage, which could reduce the potential savings.

00:32Currently, interest rates for 30-year mortgages are higher than those of 15-year mortgages.

00:37Homeowners also wouldn't build equity as quickly with a 50-year mortgage as they would with a 30-year

00:42mortgage. For the first several years of a mortgage, a homeowner is primarily paying interest. It takes

00:47several years before they actually start reducing their debt. Buyers with a 50-year mortgage would be

00:51paying down their debt much more slowly compared to a 30-year mortgage. And if housing prices go down,

00:56people with a 50-year mortgage could be at risk of having negative equity, meaning that they would

01:01owe more on their mortgage than their home is worth. In short, if homeowners opt into a 50-year

01:06mortgage, their monthly payments would become more affordable, but the longer-term loan could also

01:10carry significant risks.

Category

Transcript

Be the first to comment

Recommended