Time - The monthly payments for a 50-year mortgage would be lower than those for a 30-year mortgage, according to Alex Schwartz, professor of urban policy at The New School.
Imagine, for instance, that a person is purchasing a $500,000 home with a 30-year mortgage. The current interest rate for a 30-year fixed mortgage is about 6.22%, according to Freddie Mac. That means if the home buyer put down a down payment of 20%, their monthly payment of the principal and interest would be $2,455, according to Fannie Mae’s mortgage calculator. But if they took out a 50-year mortgage, again with a down payment of 20%, then their monthly payment of principal and interest—assuming that the interest rate is the same—would be $2,171, according to Fannie Mae. That’s a little under $300 less than the monthly payment for a 30-year mortgage.
“It’s a reduction, but it’s not dramatic,” Schwartz says of the difference between monthly payments for 30- and 50-year mortgages.
He also notes that the interest rate for a 50-year mortgage likely wouldn’t be the same as that for a 30-year mortgage, which could reduce the potential savings. A higher interest rate is just one of a few possible drawbacks to a 50-year mortgage, he says.
One drawback of a 50-year mortgage is that it would take home buyers longer to pay off their debt.
“If you were 30 years old and bought a home with a 30-year mortgage, it would be owned free and clear at age 60, so you’d only have to pay property taxes and maintenance on the home, no longer having to pay a mortgage during your older years or retirement,” Schwartz says.
“If you were now paying a loan for a 50-year mortgage, and you’re 30, the mortgage wouldn’t end until you’re 80, and so you would have a period of time, most likely during retirement, where you have to pay the debt service costs on top of the property taxes and maintenance,” he continues.
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