Longer Loans: A Costly Trade-Off for Homebuyers

The idea of stretching out mortgage payments over 50 years might seem like a lifeline for those struggling with high housing costs. On paper, it looks like a win: monthly payments drop by about $119. But here's the catch: you end up paying almost double the interest over time. That's a big trade-off.

The Slow Pace of Equity

You're not just paying more in interest; you're also building equity at a snail's pace. And here's another thing to consider: the average first-time homebuyer is now 40 years old. That means many people might not live long enough to pay off their mortgage. It's not exactly a legacy anyone wants to leave behind.

Crunching the Numbers

Imagine a home priced at $420,000. With a 12% down payment, you're looking at a loan of about $369,600. A standard 30-year mortgage at 6.33% interest comes out to $2,295 a month. But stretch that to 50 years, and the interest rate ticks up to 6.83%. Your monthly payment drops to $2,176, but over time, you'll pay an extra $389,000 in interest.

The Bigger Picture

The housing market is in a tough spot. Affordability is near its worst since the 1980s, and construction isn't keeping up. There's a shortage of about 7 million homes. Some suggest boosting the use of manufactured wall panels to speed up construction and cut costs. It's a creative idea, but will it be enough to fix the housing crisis?

The Bottom Line

A 50-year mortgage might help some people afford a home now, but it's not a long-term solution. It's a band-aid on a much bigger problem.