ATLANTA — As federal housing officials explore the idea of 50-year fixed-rate mortgages to help lower monthly payments and boost homeownership, critics warn the plan could hurt buyers in the long run.
WSB Consumer Expert Clark Howard says the proposal currently being considered by the Federal Housing Finance Agency, would leave buyers paying more interest while making little progress toward owning their homes.
Howard explained that under a 50-year loan, a homeowner buying a $400,000 house would still owe about $390,000 after 10 years, building only around $1,000 in equity per year.
“You’re never making any progress on what you owe on the home, and you’re paying huge amounts of interest,” he said.
The White House argues that longer loan terms could make homeownership more attainable by reducing monthly costs, but Howard strongly disagrees. He compared the idea to extended car loans, which have led to higher repossession rates. “If we go to 40- and 50-year home loans, we’re going to have the same problem,” he said, calling the plan “an atrocious idea for your wallet.”
Howard believes a better solution for affordability, especially in metro Atlanta, would be to ease zoning regulations and make it easier for developers to build more affordable housing options.
He said tackling those barriers, not extending loan terms, would be the key to addressing America’s housing affordability crisis.
WSB Radio’s Jennifer Perry contributed to this story.