Derek McGowan breaks down whether a 50-year mortgage actually helps. On a $400,000 house, it cuts your monthly payment by $143, but after 10 years a 30-year borrower has paid down $65,000 of principal while a 50-year borrower has paid down only $15,000. It might help you qualify, but you're building equity much slower.
$143 per month.
$65,000.
$15,000.
$17,000 less.
$650,000 (from an initial $400,000).
Is the new 50 year mortgage the secret to making homes affordable again? Or is there more to the story? Let's take a $400,000 house and let's say you stretch it from a typical 30 year term out to the new potential 50 year term. That would save you $143 a month on your payment. But let's play it out over time. Let's say over the next 10 years you make just the minimum monthly payments on both options. With the 30 year, you would have paid your balance down by $65,000. With the 50 year, you would have paid down by $15,000. Now on the 50 year, you paid $17,000 less in payments by the monthly payment savings. So you left 33 grand on the table. The quick answer is if you can aff year and you're comfortable with it, that's your option. However, for the right situation, if it was a difference of you qualifying for the house or being comfortable with the payment, getting into the house is the most important thing. Because over that 10 year span, that $400,000 house is now worth $650,000. You don't want to miss out on the bigger picture there. So for the right situations, the 50 year could make sense.
