Is a 50 Year Mortgage a Good Idea?

Learn more in this blog from Ryan Lococo of the NEO Home Loans Gustafson Lococo Team

The right plan for the right situation

There is no blanket answer to this question, but for a specific buyer's situation, it might be the right option. If the only objective of the mortgage is to make it more affordable, this could be the way to go.

How much would you save per month on a 50 year mortgage instead of a 30 year mortgage?

Longer term loans typically have a higher rate, which will eat away at the savings of spreading the loan out for an extra 20 years. This being a new option on the market, we don't have accurate rates or pricing to fully understand what a 50 year mortgage will cost. A 30-year loan at 6.5% for $500,000 would be in the ballpark of $2,450 a month. That same loan spread out over 50 years with a rate that is 0.75% higher will run about $60 to $75 dollars cheaper a month.

Should I just rent instead?

Homeownership brings stability and strength in ways that renting a home just can't. If we zoom out and disregard the financial and wealth benefits or impacts, you are still left with a home for you and your family at the end of the day. Equity accumulation is only possible through ownership and is a substantial wealth creation tool. Owning a home is often more advantageous than renting, assuming an appreciating marketplace.

Will I be locked into a 50 year mortgage if I choose it?

The assumption is that this product will work like any other loan, meaning that you could pay it off at any point in the life of the loan. Selling or refinancing the loan would also be an option without penalty. Due to refinancing or selling, the average length that a 30 year loan is held in today's market is 5 to 7 years. This is due to the frequency of refinancing and selling. The same could be true of a 50 year loan.