The American dream of homeownership is slowly becoming somewhat of a fantasy.
Although home prices have cooled off a bit, wages still are not keeping up, and for the first time ever, the median age of a first-time homebuyer in the United States has hit 40, a milestone that says a lot about just how squeezed the market has become. Against this backdrop, the Trump administration has floated three solutions that some experts support while others vehemently oppose …
Solution 1: 50-year mortgages
The concept is simple. Spread your loan over half a century instead of three decades, and the monthly payment drops. On a $410,000 home with a standard 20% down payment, a 30-year mortgage at 6.3% runs about $2,030 a month. Stretch that to 50 years at the same rate, and the payment falls to roughly $1,800. That $230 monthly difference could be the margin that gets a buyer off the sidelines … or so the argument goes.
As reported by Blake Devine on Fox News 13, Tatiana Zagorovski, a St. Louis real estate agent and investor, said that when it came to 50-year mortgages: “Life is getting harder, the prices of housing is going up and a lot of people cannot afford the payments for the house.” and then also continued “If you do the same terms over 50 years you will pay an additional $350,000 which is the price of another house!”
There’s also a broader market dynamic worth considering. When more buyers can suddenly qualify for a loan because the monthly payment is lower, demand goes up. When demand outpaces supply, prices rise. It happened during the low-rate era of 2020 and 2021, and experts warn that a similar dynamic could play out here.
Real Estate Broker Derek Calrson, CEO of the Reality One Group MVP in Florida, which operates 10 real estate offices across the Sunshine State, said:
“Affordability in this country has been out of control for many, many years. The incomes are not matching the appreciation that these homes have been going up substantially. We’re seeing the reduced monthly payment, but on the back end, you’re looking at hundreds of thousands of dollars of additional interest that’s gonna be paid to the bank. For this to even happen, Congress is gonna have to vote it in to extend that 30 years to 50 years so that these mortgages are backed by insurance.”
The intended beneficiaries of a more affordable loan, first-time buyers with thin margins and smaller down payments, could end up being priced out anyway by the very competition the policy creates.
Solution 2: Portable mortgages.
A portable mortgage is a loan you can take with you when you move. Instead of paying off your existing mortgage and getting a new one at current rates, you transfer the loan (and its interest rate) to your new home.
It’s directly aimed at solving what’s called the “lock-in effect.”
Millions of homeowners locked in rates of 2–3% a few years ago, and today’s rates are hovering around 6–7%. Rather than trading that low-rate mortgage for a much higher one, a portable mortgage would let borrowers keep their existing rate when buying another home.
There are several significant problems with portable mortgages, and they go deeper than just policy hurdles.
The operational complexity is massive.
Origination and servicing would become far more complex because the lien, escrow, taxes and title obligations all depend on the specific property.
It only helps a narrow slice of people.
Even setting aside the technical problems, the benefit is highly selective. Only current mortgage holders with low rates would benefit — renters and homeowners without a mortgage would still face today’s rates. So, it does nothing for first-time buyers or anyone who doesn’t already own a home with a favorable loan.
It might not even solve the core problem.
A Federal Reserve report found that the lock-in effect only explained about half the recent decline in housing mobility, meaning even a perfectly executed portable mortgage program wouldn’t return the market to normal activity levels on its own.
The bottom line, as one Realtor.com economist, Jake Krimell, puts it: Overall, portable mortgages might seem like a good way to mitigate the lock-in effect, a niche issue unique to current market conditions. However, widespread implementation would introduce thorny technical problems and significant unintended consequences, many of them worse than the issue they’re trying to solve.
Meanwhile, the administration is also exploring a third solution: allowing first-time buyers to tap their 401(k) savings for down payments without penalty. A proposal that draws some of the same concerns about trading long-term financial security for short-term access, and would just end up putting more Americans in homes with little to no savings or retirement.
All three ideas reflect a genuine problem. The housing market is broken for many people. Whether stretching debt across five decades is the right fix is another question entirely.
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Nate Jurewicz is a licensed real estate agent with Keller Williams New Tampa and a pre-foreclosure specialist in short sales. He can be reached at [email protected].