How to Spend a Million on a $400K Home: 50-Year Mortgage Math

Mortgage rates moved modestly lower this week, but interest rates were not the big news for anyone following home loans. President Donald Trump's social media post about a 50-year mortgage stole the show, as economists and pundits critiqued the ins and outs of such a proposal.

Though details weren't provided, the three-word version says plenty: 50-year mortgage. A loan that, if you didn't sell or refinance — which to be fair, most homeowners will at some point — would take half a century to repay. The idea popped up in a Truth Social post from the president over the weekend, which was quickly re-posted on X by Federal Housing Finance Agency director Bill Pulte.

Aiding affordability is the intention of the proposed ultra-long loan, but reaction was swift and strongly negative. Let's slow down for a second and dig into how mortgages work, and what a 50-year loan would look like.

Lower monthly cost, higher total cost

Reducing a loan's monthly cost by taking longer to pay it back is basic math. Divide any loan amount by a larger number of months and you'll get a smaller monthly payment, because the loan's cost is spread over more time. A lower payment keeps more money in the borrower's pocket on a month-to-month basis.

But — and this is a big but — over the life of the loan, borrowers pay less on loans with shorter terms. The vast majority of mortgages in the U.S. are 30-year, fixed-rate loans because these offer manageable monthly payments. But folks able to swing the higher principal payment on, for example, a 15-year loan spend less overall. That's because, even with the same interest rate, the 30-year borrower is paying interest for twice as long as a 15-year borrower.

Here's where it gets a little complicated: Home loans with different repayment terms also have different interest rates. Mortgage lenders' interest rates are lower for shorter-term mortgages, because the money's paid back more quickly. A shorter term means less risk for the lender.

So for example, while the average rate on a 30-year fixed-rate mortgage was 6.14% APR this week, the average rate on a 15-year fixed-rate home loan was 5.59%, a difference of 55 basis points, according to rates provided to NerdWallet by Zillow. (A basis point is one one-hundredth of a percentage point.)

Interest rates on a 50-year loan would be higher than rates on a 30-year loan. The 50-year loan might offer the lowest monthly principal and interest payment, but it would be the most costly option overall.

Comparing loan terms

Let's look at some numbers to see how this would play out. This example uses principal and interest costs on a $400,000 loan — to keep it simple, we aren't getting into homeowners insurance, property taxes and other costs of homeownership. We’ll round interest rates from this week's averages, and assume a hypothetical 50-year rate.

The monthly payment difference between the 30 year and the 50 year is less than some mobile phone bills, with the 50 year leaving an extra $130 in your pocket each month. The total cost of the loan, however, is staggering: north of a million dollars, and over half a million more than the 30-year. (If you think our presumed 50-year interest rate is too high, at the same rate as the 30-year — 6.25% — the monthly savings would be about $280, and the total cost would still be over $1.3 million.)

Beyond cost concerns

There are other considerations as well. With a 50-year loan, "homeowners would build equity at a much slower pace," Daryl Fairweather, chief economist at Redfin, noted in a LinkedIn post. "After 10 years, a buyer might have only half the equity they would have built with a 30-year mortgage. This makes it harder to build wealth or move." If home prices drop, homeowners with minimal equity face a higher risk of going underwater on their mortgages — owing more money than the home's worth.

And speaking of home prices, if the prospect of a more affordable mortgage option drew more buyers into the housing market, there's the potential for increased competition. "The design of this proposal is to boost home buyer demand," Joel Berner, a senior economist at Realtor.com, noted in an emailed commentary. "More flexible financing is essentially a subsidy for housing demand, which will add to the pool and buying power of home buyers without increasing the supply of homes, which will drive home prices up."

There's also the fact that 50 years is a mighty long time. Decades ago, the 30-year term was established because it spread out payments long enough to make a mortgage affordable, but not so long that borrowers would still be paying their houses off after retirement.