Buying a home is part of the American dream, but it is also one of the most expensive and challenging aspects of that dream. Making it possible for more people to buy homes is a frequent presidential goal, and Donald Trump is no exception in this regard.
But is the 50-year mortgage a good idea? It depends on whether you are the borrower or the lender. Here’s what you need to know.
Houses are expensive, and most people need to borrow money to afford to buy a home. The loan that they typically use is called a mortgage. The key feature of a mortgage is that it is a self-amortizing loan. That sounds fancy, but it just means that each monthly payment includes an interest payment and a payment toward the principal of the loan.
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Essentially, you are paying down the loan as you go along so that, when the mortgage is paid off at the end of the loan period, there is nothing left to pay. Some investors view this as a form of forced savings, as each mortgage payment helps build equity in your home.
That said, there’s an interesting twist here. Early in the loan, when the principal is largest, the vast majority of the monthly payment goes toward interest. Over time, as the principal is slowly paid down, interest expenses make up an increasingly smaller portion of the monthly payment. This is vital to understand when examining the benefits of taking out a typical 30-year mortgage versus the proposed 50-year mortgage.
If you bought a $450,000 home with a 30-year mortgage and a 6.25% interest rate, your monthly payment would be $2,771. A 50-year mortgage at the same rate would lower the monthly payment to $2,452, according to a CNN analysis.
That’s a notable drop, but there’s a hidden cost to those savings. Because of the self-amortizing nature of mortgage loans, you are paying more in interest over the life of the loan when you extend the maturity by 20 years. The total amount you’d pay your mortgage lender in interest would be roughly $547,000 with the 30-year loan and a huge $1.02 million with a 50-year loan. So the 50-year loan would cost the homebuyer nearly twice as much in interest.
Pretty clearly, the real winner here is the mortgage lender. To be fair, there is more risk in providing a 50-year loan, as there’s more time for unfavorable events to occur. However, given the financial benefits, even the largest banks would likely jump at the chance to offer customers 50-year mortgage loans.
The largest banks, like Bank of America(NYSE: BAC) or Citigroup(NYSE: C), would be best positioned to benefit. That’s because they have the scale to spread their risk across more homebuyers. Their size and brand recognition alone would enable Bank of America and Citigroup to attract sufficient customers to initiate many mortgage loans across a broad geographic footprint. The inherent diversification this provides would likely offset the heightened risk they would face from the increased loan length.
However, there’s another type of finance stock that may be even more attractive if the 50-year mortgage loan becomes a reality. Mortgage real estate investment trusts (mREITs), such as Annaly Capital(NYSE: NLY) and AGNC Investment(NASDAQ: AGNC), purchase mortgages that have been pooled together into bond-like securities. Mortgage REITs make the difference between their costs and the interest they earn on the mortgage securities they buy.
Investors like mREITs because of their huge dividend yields. Annaly’s yield is currently around 12.7%, while AGNC’s yield is nearly 14%.
There’s a wrinkle, however, since self-amortizing loans mean that a portion of the interest an mREIT earns is principal. In essence, as these REITs pay out dividends, they are returning a portion of an investor’s capital. Over time, the value of most mREITs’ portfolios tends to decline.
To put a number on that, AGNC’s tangible net book value was $17.66 at the start of 2020. Tangible net book value is similar to net asset value for a mutual fund, which is basically the value of the mutual fund’s portfolio. Mortgage REITs report this figure quarterly, and it effectively represents the value of their business. At the end of the third quarter of 2025, AGNC’s tangible net book value had fallen to $8.28.
Interest payments would make up a larger portion of an mREIT’s income stream if the mortgage securities they bought were backed by 50-year mortgages. So the return of capital in the dividend would be less impactful on the value of the mREIT’s business. Thus, the tangible net book value would hold up better over time.
Simply put, longer mortgages would make mREITs more attractive investments because they extend the period over which interest is paid, slowing down the impact of self-amortization.
It is far from clear if a 50-year mortgage will become a thing. They have been discussed for years as a way to make buying a home easier. However, upon examining the math, the real beneficiaries are likely to be banks and investors who buy mortgage securities. Still, if the 50-year mortgage does gain traction, it could be a change that makes mREITs a more attractive investment for long-term dividend investors.
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Bank of America is an advertising partner of Motley Fool Money. Citigroup is an advertising partner of Motley Fool Money. Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
