The Truth About 50-Year Mortgages – And What Buyers Really Need to Understand Over the last week, many clients and agents have been inquiring about the concept of a "50-year mortgage" following President Trump’s mention of it in a recent interview. Whenever something new hits the headlines, buyers start wondering if it’s the magic solution that will finally make homeownership affordable. Let me be very clear: This isn't new. It isn’t well-thought-out. And it may never actually become reality. However, the questions are coming in, and our clients deserve genuine answers, not sound bites. So, let’s break this down the right way. We've Been Down This Road Before When 40-year mortgages were available in the past, the rate was typically 0.25% - 0.375% higher than that of a standard 30-year loan. That’s because investors demand more return for lending money over a longer time period. So, if we follow that logic: 40-year mortgage today: probably 0.25% - 0.375% higher 50-year mortgage: logically 0.50% - 0.75% higher That alone should tell you something, as the rate increase cancels out a lot of the savings buyers think they’re getting from stretching the loan out. And PMI? It would absolutely be higher, too. Longer risk = higher Insurance cost. Unless the government were to subsidize these loans or buy back the bonds (a form of targeted quantitative easing), the payments wouldn’t look the way people imagine. Let's Look at the Numbers (Because the Headlines Don't) Below is the actual payment comparison on $500k, $800k, and $1M loans using realistic rate differences: 30-year @ 6.00% 40-year @ 6.25% 50-year @ 6.50% Loan Amount 30yr @ 6.00 40yr @ 6.25 50yr @ 6.50 $500,000 $2,997.75 $2,838.70 $2,818.58 $800,000 $4,796.40 $4,541.92 $4,509.74 $1,000,000 $5,995.51 $5,677.40 $5,637.17 Let's be honest: That difference isn’t life changing. A 50-year mortgage barely moves the needle, as the higher rate consumes most of the benefit. Heck, the 40 year looks way better to me!! What If All the Loans Had the Same Rate?(They won’t, but for illustration…) At the same 6% across 30, 40, and 50 years: Loan Amount 30yr 40yr 50yr $500,000 $2,997 $2,751 $2,632 $800,000 $4,796 $4,401 $4,211 $1,000,000 $5,995 $5,502 $5,264 This is what people think they’re getting, but this is not reality in the mortgage markets. Longer-term loans will never be priced at the same interest rate. A More Realistic, More Helpful Idea: Easing Buyers In If the goal is to make the first few years more affordable, there’s a far better approach than creating a 50-year mortgage: A stepped-payment mortgage. Here's what it looks like. This isn’t even being contemplated, but tell me what you think: Years 1 - 3: Interest-only Years 4 - 6: 40-year amortization Years 7 - 9: 30-year amortization Years 10 - 30: 21-year amortization (remaining life of loan) This gives buyers breathing room the first few years without sticking them with a mortgage they'll never pay off. Here's what the payment looks like on a $500k loan: At 6.00% 3 years IO → $2,500 3 years at 40-year amort → $2,751 3 years at 30-year amort → $2,938 Final 21 years → $3,291 At 6.50% 3 years IO → $2,708 3 years at 40-year amort → $2,927 3 years at 30-year amort → $3,105 Final 21 years → $3,450 Some other ideas – Tax Credits? 5-year interest-only loans, 35-year term, so the first five are lower Quantitative easing to get rates back down? So, What's the Big Picture? Nothing will change quickly, but if we want all of our kids to be able to live the “American Dream,” then something has to change. People have a significant amount of equity in their homes so that values will remain relatively strong. To increase market participation, we either need lower rates or higher wages. Final Thoughts The mortgage world is abuzz with noise right now, with headlines, politics, and speculation. Buyers and agents don’t need more noise. They need clarity, numbers, and real-world thinking. I'm not sure if 50-year loans will ever become mainstream… But based on history, math, and how mortgage-backed securities actually work, I’m not holding my breath. If you want to help buyers, the answer isn’t stretching a loan forever. It’s helping them structure the right payment today, with a plan for tomorrow. Please let me know if you have any questions or if you or any of your clients, friends, or family members need my guidance. I’m just a call, text, or email away. 📞 Direct Line: 661-291-2222 – Text OK 📞 Cell: 661-714-6258 – Text OK 📞 Office: 661-260-2970 ext. 2222 – Text OK 📧 Email: Mike@AugustaFinancial.com But wait, there’s more… Interest Rates It has been a rough week, and I really don’t wanna talk about it! No real economic news to speak of, thanks to the Government shutdown! Loan Programs We do loans on Non-warrantable condos! We offer 12-day escrows for pre-approved buyers, including conventional, FHA/Jumbo/Bridge loans. We provide loans in all 50 states, so call me with anything you need. Government loans (FHA/VA/USDA) are in the 5s. Conventional loans up to $806,500 are in the high 5’s and low 6s. High-balance loans from $806,501 to $1,209,750 are also in the 6s. Jumbo loans above $1,209,750 are in the 6’s. ARMS in the 5’s and some in the 6’s Bank statement loans are available with 10% down again, with larger down payments in the 6’s++. Profit and Loss Statement loans require 20% down - no bank statements needed, only a profit and loss statement! 0 down loans are available in the high 6s, with a minimum credit score of 620, up to $1,300,000. Private Money lenders offer Hard Money Loans with 35% down. No-Ratio Loans require a 30% down payment. DSCR (Debt Service Coverage Ratio) loans are available with as little as 15% down. Bridge Loans typically have an interest rate of 7.99% with limited fees, helping you get where you need to go! 3/2/1 Buydowns, 2/1 Buydowns, and 1/0 Buydowns are available at great starting rates! Please note that interest rates are subject to change without notice, and the information above reflects LA County Loan Limits. **Good News for Condos:** Canyon Village HOA – removed last week! **Bad News for Condos*** Nothing New! CONDO HELP!!! If you have a listing or a buyer interested in a specific condo and are unsure whether it is warrantable or Non-warrantable, please call me, and we can look up Fannie’s list in real-time. We don’t know when something has changed, and it would be impossible to track everything day by day, but we don’t mind looking up a few items each day. The full state of California’s naughty list has been added to: MikeMeena.com! See the link below: https://mikemeena.com/non-warrantable-condos/ Let me know if you hear anything new about condos or townhouses. I am available every day if you need anything. 📞 Direct Line: 661-291-2222 – Text OK 📞 Cell: 661-714-6258 – Text OK 📞 Office: 661-260-2970 ext. 2222 – Text OK 📧 Email: Mike@AugustaFinancial.com Have a great day and an even better tomorrow! Please call me when you have a client who needs to borrow! Mike Meena President | Loan Officer Click to Call or Text: (661) 714-6258 This entry has 0 replies Comments are closed.
