Longer loan periods could make homes more affordable initially, but not over the long term.
There's no Fannie or Freddie out there supporting the market, though there's increasing talk of moving in that direction, asThe notion of such a long loan term is not unheard of — Japan started doing
decades ago, it's a way for parents to pass on wealth without burdening the next generation with higher inheritance taxes.There are more practical reasons that a half-century mortgage wouldn't be the best way to expand affordability in the U.S. or anywhere else, really... Borrowers would pay more. The advantage to a longer loan term is lower monthly payments, but ultimately you'd pay more in interest.
They'd also build less equity: If you have a 50-year loan on a $400,000 house you'd have $110,000 of equity after 30 years, according to calculations by the Mortgage Bankers Association. If you had a 30-year loan, you'd own the house.Most people don't actually pay off their mortgages. The median length of time someone stays in their home in the U.S. is
, according to the National Association of Realtors. So, from the perspective of a short-term homeowner, a 50-year term might make sense.Better than messing with mortgages, most housing observers here believe actually building more homes would be a better way to increase affordability.
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