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Let's talk about the 50 year elephant in the room, shall we? So over the weekend, here's the actual truth of what happened. President Trump shared a photo that's now making headlines. And it showed FDR, the president who helped create the 30 year mortgage after World War II, next to Trump, and it said Great presidents as the headline. And his modern version was the 50 year mortgage under Trump's face. And the idea reportedly came from a meeting at Mar a Lago, where Bill Pulte, who's now the head of the Federal Housing Finance Agency, presented the proposal on a poster board. So he made a little arts and crafts. He shows it to the president. He liked it enough to post it on Truth Social. And now the FHFA says they're, quote, working on it. That's all it takes, guys. You bring him a poster board with a nice picture. He goes, let's do that. That sounds fun. And what am I having for dessert at Mar a Lago? So the stated goal here is to make housing more affordable. In quotes. That's not what this does. The 50 year mortgage does not make homes cheaper. In fact, it makes the housing crisis into a dumpster fire. And let's walk through the reasons why. This is number one, the math doesn't work here. Let's look at the numbers that have been thrown out there. We're going to take a $450,000 home as the example. A 30 year mortgage at 6.25%, about 2700amonth. Total interest paid over those 30 years, $547,000. Not great, remember, on a $450,000 home. But now let's look at a 50 year mortgage. And to keep it apples to apples, I'll even give you the same exact interest rate at 6.25, which is not going to happen because this is a much riskier loan. So banks are going to charge more for it. But let's just say it's the same interest rate. Well, your payment now becomes 2450amonth. So you're saving 300 bucks at best with this loan. Total interest. This is the kicker. Over a million dollars in interest alone on a $450,000 house. Do you understand how insane that is? Now, in reality, lenders would charge that higher rate on a 50 year because it's riskier. At least 1% more, which means the savings aren't even going to be there in your monthly payment and the interest is going to be even More than that million. So that 7.25%, let's keep it there. That's 2600 bucks versus 2700 bucks. So whoop dee doo, you saved 100 bucks a month all to pay $1.18 million in interest for that home. That is insane. That is not affordability. It's a financial illusion that's going to keep people broke until they die. Because we know the average first time homebuyer is now 40 years old. So let's walk this out. You're going to die statistically before you pay off your mortgage. So I guess generational wealth is going to turn into generational debt. That's what you're doing. If you take this on reason number two, you are not building equity. You're just renting from the bank instead of your landlord. So here's what really happens under the hood. You see mortgages are front loaded with interest. So when you look at your amortization schedule, that's the nerdy sheet that shows you how much is going to principal versus interest. At first, every single dollar, almost every dollar is going to the bank, not toward your house. So let's share some examples here. On a 15 year mortgage, you start paying more principal than interest around year eight. That's when you sort of tip the scales. On a 30 year takes about 12 years. On a 50 year mortgage, it takes almost 40 years before you're paying more of your payment to the principal than to interest. Which means the average homeowner keeps their home for about 11 years and they're moving on. By 11 years in, you've paid that 450,000 mortgage down to about $380,000. Do you not see how insane that is? You have built almost no equity in almost a decade by taking on this kind of loan. So that's problem number two. Number problem number three, it makes the housing crisis worse, not better. You see, stretching debt doesn't make homes more affordable. It's just going to make home prices go up. And we see this with the car market, right? We're introducing seven year car loans. Well what happens, everyone just goes cool, we'll just keep raising the prices. College tuition, we saw something very similar happen because they realized people would just take on a bunch of debt and the government was going to back it. That's what's going to happen with these mortgages. So when buyers can afford a slightly higher payment, builders and sellers are going to respond by raising prices. Because now we have more demand. It's a classic supply and demand curve here so that's problem number three. Problem number four, it's going to add massive risk for homeowners. Here's why. Borrowers would pay roughly 400 to 500 grand more in interest on that medium priced home if it's stretched out from 30 to 50 years. And when it takes three to four decades just to pay down half of your principal, even a small decline in housing values could wipe out all of your equity. That is frightening. And that's not including just closing costs and realtor fees that would eat into what you would have built up in equity. That's frightening. So this is a debt treadmill where you never catch up. It's if you move to the next home a decade later, you're just gonna make a lateral move. You've built almost no equity. Number five, it is a legal and financial nightmare. To make this work, regulators would have to rewrite rules and convince investors to buy these ultra long loans. And I don't know if you know how banks and investors work. They want money like sooner rather than later. So what they're gonna do to compensate is higher rates, more baked in fees because it's already a fragile system as it is. So this is a financial time bomb. Which brings us to problem number six. This doesn't benefit the American people at all. It only benefits banks, builders and Wall Street. Here's why. Let's be clear about who wins here. Banks get 20 extra years of guaranteed interest, which means if they actually play this out, they're going to get double what they would have in that 30 year mortgage. Then you've got builders. Builders get to sell higher priced homes because monthly payments look more affordable. And then you've got investors who get 50 years of cash flow from your paycheck on Wall Street. So the only loser in this setup is you, the homeowner. And there's been a lot of people, a lot of backlash toward this, even from the Republican Party. Marjorie Taylor Greene even said that it rewards the banks, mortgage lenders and home builders while people pay far more in interest over time and die before they ever pay off their home. This is coming from a staunch Republican. So this is a system designed to keep you in debt for life. Now the proponents of this, and this is what I've seen on social media when I posted about it, when everyone posts about it, well, people will just refinance. Well, people will just pay extra and so it's no big deal. Listen, I don't know if you've met humans, but we are emotional creatures and the stats show That a very, very small percentage of people, about 7% or 9% systematically actually pay extra on their mortgage. So left to their own devices, humans are just going to do the bare minimum. The they're going to just make the minimum payment. And by the way, people who are going to take on a 50 year mortgage probably are going to do it with very little down and very little margin in their budget. This is a desperate move that's targeted at broke people. So if you do it the Ramsey way, you're going to go for a 15 year, which means you're going to pay a fraction of that interest, likely about little over six figures, 160 grand in interest instead of a million in interest. Oh, and by the way, you're debt free in 15 years. So even if you took on that home at 40, you're debt free by 55 instead of 90 years old. Maybe making your last payment from the old folks home if you're lucky, if the Lord willing and the creek don't rise. And this is what I love. The old French word mortgage literally means death pledge. And America has finally we've taken this on and we're saying, you know what, make it a death pledge, literally please. Because for 50 years I'm deciding I'm going to be a slave to the lender. Proverbs says that. Proverbs 22:7. The borrower to slave to the lender. The rich rule over the poor. So is this the fix for housing? No. Do I believe that there could be a better economic climate and economy that could be more beneficial to the American people? Absolutely. We could build more homes to increase supply. We can try to stop corporations and hedge funds from buying up all the single family homes. We could maybe let homeowners transfer their low mortgage interest rate when they move, which would unlock some inventory because right now people are sitting with golden handcuffs. We could even raise the capital gains exclusion so that long term owners can sell without losing equity to taxes. That would be a cool solution. But here's the thing. I have very little faith in any policy taking place that's going to make it easier for the American people to buy a home. In fact, as we've seen, it's only going to become harder. So what's my take on this? Don't wait on a policy to fix your life to allow you to become a homeowner. Bet on yourself instead of the government, instead of on a housing market. That's a moving goalpost. So what's the real way you get out of debt? You build up an emergency fund and you get a down payment saved up and that might go slow, it might be 40 years old before you can take on that home. But when you do it the Ramsey way and it's no more than a quarter of your take home pay you're not going to be an alert. You're not going to be paying off that mortgage until you're in the old folks home. You, you're gonna be debt free owning that home outright instead of it owning you which is exactly what this 50 year loan is designed to do. And by the way what did Trump think about it? He said it's not that big of a deal you don't pay our bills Mr. President it is a big deal to lock someone in a death pledge for the rest of their life. So to that I say no thank you Mr. President I will hard pass on a 50 year loan.
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