US President Donald Trump proposed a 50-year home loan mortgage to help owners find it affordable to pay their monthly installments. “All it means is you pay less per month,” Trump said in an interview that aired on Monday. The maximum housing loan limit in the US, and also the rest of the world, is mostly 30 years. The President proposed an additional 20 years to relieve homeowners from unaffordable EMIs.
However, the idea has been met with skepticism as Trump’s 50-year mortgage plan burdens homeowners further. Paying the loan for five decades increases the amount of interest homeowners would end up paying. The move would rob them of building wealth and lock them in a prolonged and endless EMI loop.
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Wealth Building Depreciates in Trump’s 50-Year Mortgage Plan
David Dworkin, CEO of the National Housing Conference, said to Bloomberg that homeowners would never build wealth in their lifetime under Trump’s 50-year mortgage plan. “A 50-year mortgage dramatically depreciates the biggest value of homeownership — wealth building,” he said.
He cited an example of a $420,000 mortgage with a 20% down payment with a 6.3% interest rate. In Trump’s 50-year mortgage plan, the EMI would be lower by just $236 a month. But the total cost, over five decades, would make homeowners cough up an additional $360,000 in interest. “The total cost of the home would rise to roughly $1.1 million,” said Lawrence Yun, Chief Economist at the National Association of Realtors.
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“With nearly $360,000 more in interest paid over the life of the loan, it would also take almost 40 years to pay off half the balance. Meaning most borrowers would not begin building meaningful equity until the final decade,” he said. However, Trump has defended his 50-year mortgage plan, calling it “not a big deal.” While the President is only floating the idea, it has yet to become law.