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President Donald Trump’s latest pitch for a 50-year mortgage is raising eyebrows in some real estate communities, especially with the average age for first-time home ownership reaching 40, according to the New York Times (1).
Critics include Shark Tank’s Kevin O’Leary, who was quick to give his unfiltered opinion.
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“This is just kind of a financial engineering because the amount of interest you’re going to pay over 50 years, you’ll never own the home,” O’Leary said on CNN (2). “It’s the same as renting in my view, so I don’t like the idea.”
A 50-year period could make the mortgage a lifetime commitment, which just replaces your landlord with the bank (1).
Fox Business also asked O’Leary about the perpetual mortgage (3).
“If you’re 40, you’re going to be friggin’ dead before the mortgage is paid off,” O’Leary noted. “I mean, 50 years is beyond a lifetime. If the average age is 40, you’re 90 — not everybody makes it that far.”
O’Leary also explained how much more expensive a mortgage that lasts this long actually is.
“You’re going to pay so much interest to save 200 bucks a month,” he said. “You’re going to pay almost three times more interest than a normal mortgage.”
While a slightly cheaper mortgage payment is certainly appealing these days, when inflation, as O’Leary noted, is “still north of 3%” — paying interest for 50 years could be financially devastating for many homeowners.
Look for a 15 or 30-year mortgage instead
With the average sale price of a home sitting at $512,800 according to the FRED (4), it’s increasingly important to take your time both finding a home and securing a mortgage.
Rather than taking on a 50-year loan that will potentially last you the rest of your life, it’s often better to look for a reasonable 15- or 30-year mortgage and pair it with the lowest interest rate available. As it stands, the fixed rate for a 30-year mortgage was 6.23% in November, while a 15-year mortgage came in at 5.51%, based on data from Freddie Mac (5).
Since longer mortgage terms are associated with more risk for the lender, it’s likely that a 50-year mortgage would be higher than the fixed rate of 6.23% for a 30-year mortgage. This could lead to a situation where homeowners are only able to pay off the interest on their home without making a dent in the principal.
To find the best rate for your mortgage, regardless of the term, it’s typically a good idea to shop around and obtain quotes from at least three to five lenders.
To make this process easier, platforms like the Mortgage Research Center (MRC) can help you quickly compare rates and estimated monthly payments from multiple vetted lenders.
This can help secure the best mortgage rate possible. Even a small rate reduction can translate into significant savings over the life of a loan.
By entering your zip code, property type, price range and annual income, you can view mortgage offers tailored to your needs and shop with confidence.
Read More: No time to lower your crippling car insurance rate? Here’s how to do it within minutes — you could end up paying $29/month without a single phone call
Mortgage-free ways to invest in real estate
When the president’s pitch for affordable home ownership is making a mortgage last a lifetime, it’s easy to see why some might prefer to rent instead.
If you’re not looking to take on a 50-year mortgage, but still see the value of investing in real estate to diversify your portfolio, there are a few options worth considering.
Mogul offers investors fractional ownership in blue-chip rental properties. This real estate platform provides monthly rental income and real-time appreciation alongside useful tax benefits — minus the mortgage.
Founded by former Goldman Sachs real estate investors, the team hand-picks the top 1% of single-family rental homes nationwide for you, while providing a cash-on-cash yield average of between 10% to 12% annually.
Just sign up for an account and browse available properties you might be interested in to get started. Once your information is verified with the team, you’re set up to invest like a mogul.
If the travel real estate market sounds appealing, you might consider Arrived.
Backed by world-class investors like Jeff Bezos, Arrived lets you invest in shares of vacation and rental properties, creating a passive income stream that avoids midnight maintenance calls and burst pipes.
To get started, just browse their selection of properties, all vetted for appreciation and income generation potential. Once you choose a property, you can start investing with as little as $100 to see if Arrived is right for you.
Arrived also offers a secondary market for selling your shares. This can give you more flexibility to move money around, especially when compared to managing a mortgage.
If you’re an investor who’s more interested in commercial properties, First National Realty Partners (FNRP) might be your next step. FNRP allows individual investors access to commercial real estate opportunities without the headache of being a landlord.
Through FNRP, accredited investors can own a share of properties leased by national brands like Whole Foods, CVS, Kroger and Walmart — a minimum investment of $50,000 is all you need to get investing in commercial real estate.
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Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
CNN (1); The New York Times (2); Fox News (3); The Federal Reserve Bank of St. Louis (4); Freddie Mac (5)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.