When I was a younger man, I bought a house, my first, with a 9.75% 30 year fixed mortgage. Every monthly payment sent a few dollars into equity and gradually increased over time so equity built up faster. It was still slow and of course amortization is designed to maximize the interest paid first keeping it as high as possible for as long as possible. But even so, if not refinancing and resetting the 30 year clock again the hope of attainting a house PAID IN FULL with no debt was present. In most careers 30 years, though still long, was doable and achievable and acceptable.
The craze to refinance skewed this hope because with each refi came a new 30 year term so in a way it became a death loop endless mortgage AND depended on ever increasing real estate values to keep it going. No rise in real estate values, no equity to pull out and no reason to refi unless rates dropped significantly which has occasionally happened. When real estate collapsed in the GFC, refis dried up for a while as did home sales. They did come back though so its was game on again and here we are in late 2025 with high rates and high prices and the once American Dream now barring new home buyers like Katie barred the door.
The recant discussion out of the White house has included initiation of a 50 year mortgage term. This was supposedly to lengthen the repayment time and thereby lower the monthly payments. Similar to the auto loan craze of 72, 89 or even 120 month loan repayment schedules, a 50 year mortgage is really just a debt bomb albatross that will likely never be paid off and if it is will very possibly be under water…that means worth less than the loan balance or paid off loan. It is an ugly proposition to be under water like that.
Amortizing over 50 years means that the amount devoted to reducing the principal or increasing the equity is very very small. In fact in the first 10 years it is just under $10K…10 years and under $10K in equity or principle paid off. Yikes! That really sucks. Plus the 50 years of property taxes, pmi, insurance and maintenance expenses use up a lot of the so called equity. These coupled with interest over 50 years makes owning a home questionable as a financial matter but the white fence does have its pull.
Assuming real estate either maintains its value or rises over the 50 years there could be something at the end of that rainbow but I believe getting to 50 years is unlikely. Plus the interest paid, property taxes paid and maintenance expenses, pmi and other insurance will eat up most if not all of it. These expenses are seldom if ever considered in the calculus that supports home ownership using borrowed money. It is an ongoing argument about residential personally occupied real estate ownership.
I think Trump and his team are way off on this proposal and I do hope it dies on the vine along with other idiotic plans and/or proposals. Tariffs are now showing up in CPI and now Trump wants to lower tariffs on coffee, beef and other imported items that is tantamount to admitting his Tariffs made them go up in the first place. Dumb. To say a Tariff is not a tax the citizens pay is simply false. Of course, one of the current plans in discussions is giving a Tariff Bonus Check to every Citizen of $2000. I am against it on the basis that it is misnamed being a tax refund not a “bonus” and that is but reason.
I for one advise against the 50 year mortgage. But then again, who listens to me. Maybe if I keep railing against it for 50 years someone will hear me.
Best,
Donn Marier
DM-Your Own CFO