50-Year Mortgages

President Trump recently suggested a 50-year mortgage in response to the inaccessibility of home ownership for young people looking to become first-time homeowners.  Since home ownership has traditionally been the biggest source of wealth building for the average American family, the inability of younger Americans to buy their first home prevents them from using one potential wealth building tool.  While we do not think most of your wealth should be tied up in your primary residence since there are much better ways to accumulate wealth over time, the unaffordability of housing is a problem. 

But the 50-year mortgage is not the way to solve the problem.  The average American life expectancy is 78.4 years, 75.8 years for men and 81.1 years for women.  The median age of first-time homebuyers in the United States is 40 years old.

That is a big math problem, and not the kind you solve with a fun formula.  The average 40-year-old homebuyer would pay off a 50-year mortgage at age 90.  That is approximately 12 years after they are expected to die.

Expecting mortgage payments from deceased folks is probably not the best solution to the inaccessibility of home ownership.  While lengthening mortgage terms happened in the past, we have reached the inevitable tipping point where the math of a longer mortgage no longer makes sense.

A History of Mortgages in the United States

We have had mortgages in the United States since the beginning of the country’s existence, but the terms used to be much shorter.  The average mortgage term in the 1920s was 3–5 years and usually required a 50% down payment.  For perspective, that is a higher downpayment and shorter term than the average car payment in 2025.  Americans could own their homes relatively quickly and enjoy appreciation without home payments early in life.  Home financing was also a private sector business without government involvement before the Great Depression. 

The Great Depression changed this mortgage norm that existed for more than a century.  Depreciating home values left homeowners with mortgages responsible for loans that far exceeded the depreciated value of their homes, despite 50% down payments.  At a time when many Americans also faced job loss and declining wealth in general, the burden of home payments added to economic hardship, leading to foreclosures across the country.  

The New Deal addressed this crisis by creating the Home Owners’ Loan Corporation (HOLC) and refinancing more than a million mortgages between 1933 and 1935.  HOLC extended the term on mortgages to 15 years to make them more affordable and introduced fixed-rate mortgages that made payments predictable.  Despite the long term, interest rates were capped at 5% and later reduced to 4.5% in 1939, even though mortgage terms lengthened to 25 years in 1939.  The public sector further involved itself in home ownership by establishing the Federal Housing Administration (FHA), a federal organization that offered mortgage insurance on mortgages with approved lenders, in 1934.  In 1938, the federal government went one step further by establishing Fannie Mae, which could purchase, hold, and sell FHA-insured mortgages.

Despite increasing the length of mortgage terms five-fold, the housing market did not recover from the Great Depression until after World War II, when the G.I. Bill of 1944 eliminated the requirement of a down payment for returning soldiers seeking a mortgage.  The legislation made housing accessible to all those who served, but it also normalized a significant increase in debt when purchasing a home.

In the late 1920s, the average American had a 3–5 year mortgage with 50% down, leading to ownership of a wealth-building vehicle in less than five years with minimal debt along the way.  In the late 1940s, the average American could enter into a 25-year mortgage without a down payment.  All because the federal government stepped in to make buying easier without actually solving the housing affordability problem.

The 30-Year Mortgage

In 1948, new constructions could opt for a 30-year mortgage, extending above the 25-year mortgage recently normalized.  By 1954, Congress authorized 30-year mortgages for preexisting homes.  Since then, the longer mortgage term has become the norm for first-time homebuyers and most homebuyers across the country.

For complete transparency, we have a 30-year mortgage.  But I would not enter into one right now.  We have a 30- year mortgage with a 2.75% interest rate, meaning my high-yield savings account earns money faster than the interest accrues on our mortgage.  Because we can earn money faster than the interest accumulates on our mortgage, it makes sense to take the long mortgage and pay it off slowly while our money continues to grow.

I would have a different perspective with an interest rate above 4%, like they are for both 30-year and 15-year new mortgages right now.  If you cannot grow your investments more than your mortgage interest rate, that interest becomes a significant cost over time.  To add to the problem, high interest rates over a long term delay using your home as a wealth-building vehicle because amortization schedules have homebuyers pay mostly interest initially.  As time goes on, more of each payment eventually goes towards the principal, letting the homeowner build up equity.

Depending on your interest rate, you end up paying a lot more than just the cost of your home.  Someone with a 2% interest rate would pay $133,063 for every $100,000 borrowed over time on a 30-year mortgage.  Our 2.75% interest rate has us pay just under $147,000 for every $100,000 borrowed over 30 years.  With a 5.3% interest rate, a homebuyer pays twice the amount borrowed over time.  Today’s average mortgage rate of approximately 6.25% has homebuyers paying nearly $222,000 for each $100,000 borrowed over 30 years.

Math Problems with 50-Year Mortgages

The math gets much worse for a 50-year mortgage.  Instead of paying for more than two times the value of a home, that same homebuyer with a 6.25% interest rate would pay more than triple the amount borrowed over 50 years.  While the 50-year mortgage is framed as a method to make home ownership more affordable so young people can start building wealth, paying for a home three times over will reduce access to other opportunities these home owners have to build wealth.

Loan payments at 6.25% interest (per $100,000 borrowed)

A 50-year mortgage lowers the barrier to entry into the housing market, but it sticks homebuyers with additional debt for five decades.  It also does not significantly lower the mortgage payment from the 30-year mortgage option!  Imagine paying more than $100,000 more over time to save less than $100 a month for every $100,000 borrowed!  In some ways, it is a modern-day GI Bill, making it easy to own a home now but leading to that home costing you much more over the long term.

The length of the loan term does not just add more money to the price tag: It also increases existing problems with mortgage length and the stages of life of the average American.  This is already a problem.  If the average American purchases a home with a 30-year mortgage at age 40 but retires at age 65, they need to find a way to continue paying off that mortgage for five years while living off of regular retirement income, or they have to continue working until age 70.  Both can severely complicate retirement plans, life plans, and saving for retirement.

However, there are many strategies to get around a higher expense that only exists for five years.  An expense that would exist for 25 years of retirement, should we all be so lucky, is much more detrimental.  Even if you start working at age 18 and somehow magically buy a house immediately, a 50-year mortgage will not be paid off by the time you reach age 65!  It is unfathomable to think the solution to our housing affordability crisis is extending mortgages beyond a 47-year career.

A Culture of Financial Mismanagement

Because it is not the solution.  The 50-year mortgage is the latest installment of financial mismanagement that has plagued our country since the mid-1900s.  No single event tipped the United States into rampant consumerism, but a culture of encouraging World War II era spending to support the war effort did not stop when the war ended.  We needed more in the 1950s than the 1940s, more in the 1960s than the 1950s, and so on until we now somehow need more shirts in our closet than there are days in the year, more cars in the garage than drivers that live in the house, and more bedrooms in a home than people living in the home.

American culture is built around buying, and people are struggling to keep up because we are all expected to buy a truly incomprehensible amount of stuff.  Extending mortgages to 50-year terms is no different than using Buy Now, Pay Later services to pay for a kitchen appliance in four installments.  We are buying so much that the only way to keep up is to constantly be in debt.

So we can talk about what debt is, honestly.  Debt is owing life hours dedicated to work in order to pay for something we already own.  It means we get to own the car, scarf, or house, but we do not own our time.  We do not own the hours of our life.  We are letting people take time, the most important thing we have, so we can have a new couch.

The 50-year mortgage would force us to lose out on a whole extra house’s value of investments over that half century.  Hundreds of thousands of dollars that would be growing to allow us to retire, fund children’s college funds, vacation, or feel secure if we encounter illness would be wasted.  Just because Americans have historically built wealth through their homes does not mean it is the only path to wealth building.

How Do We Fix This?

Our culture of financial mismanagement will take decades to fix.  Fortunately, you can elect to opt out of the culture, to an extent and in different ways that work for your lifestyle.

If you want to become a homeowner, there will be hard financial decisions in other parts of your life.  The housing market is still terribly unaffordable, and that will not change.  Save a downpayment as quickly as possible and enter into a 30-year mortgage, or a 15-year mortgage if you can swing it, to pay less in interest over the loan term.  Cut out the Buy Now, Pay Later purchases, food waste, new cars, subscriptions, and everything else because home ownership in many zip codes is a tough goal.

Alternatively, switch zip codes for your mortgage.  Individuals in high cost of living areas are opting to purchase vacation homes and rent small places in their expensive cities.  In our region, this would mean something like renting a small home in Washington, DC to be close to obligations here while purchasing a home in Maryland or Delaware near the ocean.  The vacation home would appreciate and facilitate wealth building through real estate without breaking the bank in the process.

The other way to opt out is to decide to build wealth using other avenues than home ownership.  The average American has most of their wealth tied up in their home.  Patrick and I certainly do not.  Our index funds hold significantly more value than the amount of our home equity.  We own a home to have a place to live, not as a wealth-building tool.  Most serious wealth accumulators do not have the majority of wealth in their primary residence.  Some still choose real estate, but they grow their wealth through rental properties.  Others have index funds, small businesses, or other investments.  Following the wealth building path of the average American is a great way to make sure you end up being the average American.

I do not particularly want to be the average American.  I would rather be wealthier, and I am because most of my wealth building is focused on building wealth outside of my primary residence.  Grow wealth in other ways.  Own parts of businesses or the total stock market rather than a home.  Make goals around growing wealth rather than owning a home.

You will end up wealthier than your friends who have 50-year mortgages.