As first-time homebuyers face the steepest affordability barriers in over a generation, the Trump administration has thrust a provocative remedy into the national conversation: a 50-year mortgage.

But how would 50-year mortgages work and would they become widely available? Here’s what you should know.

The point of stretching a home loan over half a century rather than 30 years would be to reduce the size of the monthly payments — a key obstacle in today’s high-priced market. But borrowers would also pay far more interest over the life of the loan, building equity more slowly. Plus, generally speaking, the longer the loan, the higher the rate, meaning 50-year mortgages would only push today’s 6%+ rates even higher.

An analysis by UBS shows the cons would outweigh the main pro. Compared to a 30-year mortgage, a 50-year loan would only reduce the payment on a typical-priced home by 5.4%, but would require borrowers to pay roughly 225% of the total home price in interest. This is more than twice the ratio you’d pay with a 30-year mortgage. What’s more, after 10 years the buyer with a 50-year mortgage has only paid off 4% of their loan, compared to 16% with a 30-year loan. After 20 years, it’s just 11% versus 46%.

“I don't think it will actually bring the affordability that they are looking for,” Sharon Cornelissen, the Consumer Federation of America’s director of housing, told the Washington Journal on C-SPAN. “For the first 10 to 15 years, you are just going to be paying interest to the bank — it's almost like you are renting the house and the bank owns the house.”

Then there’s the issue of adoption.

Lender willingness to offer 50-year mortgages is “likely to be muted” given regulatory and market hurdles, according to a spokesperson for the Mortgage Bankers Association.

Not only would Fannie Mae and Freddie Mac not be able to buy 50-year mortgages from lenders under current rules, but given the greater chances of a buyer prepaying their loan, investor interest in buying mortgage-backed securities may also be limited. And that would mean higher interest rates for 50-year loans, the spokesperson said.

To be sure, a few U.S. lenders offer 40-year mortgages, and longer-term loans do exist in countries such as Sweden and Spain. But the 30-year fixed-rate loan is by far the most common in the U.S., while 15 years is another popular option for people who can afford the monthly payment. Some lenders (including SoFi) even offer 10-year terms, which like 15-year terms, cost more each month but include far less interest overall.

So what?

Today’s real estate is prohibitively expensive for many first-time buyers, but there would be some serious tradeoffs if Americans started using 50-year loans to become homeowners. And a lot would have to be sorted out for these loans to become widespread.

In the meantime, debate over the 50-year option is giving the affordability challenges national attention, and the market is starting to shift in favor of buyers. Prices are leveling off or even dipping slightly in some areas, homes are sitting on the market longer, and seller concessions are becoming more common. Some homebuilders are even offering mortgage rate discounts as low as 4%, according to The Wall Street Journal.

Related Reading

Trump: 50-Year Mortgage ‘Not a Big Deal’ (The Hill)

45% of Americans Would Consider a 50-Year Mortgage (BadCredit.org)

Why Lower Mortgage Rates Aren’t Enough to Make Homes Affordable, in Charts (The Wall Street Journal)

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