Decades ago, homeowners celebrated fulfilling the American dream with fire...
After their last payment was made, Americans would throw a "mortgage-burning party"... literally setting fire to their home-loan paperwork to celebrate full ownership of their property.
In the 1949 film Adam's Rib, Spencer Tracy and Katharine Hepburn roast hot dogs over their burning mortgage document.
Not many people still hold mortgage-burning parties. But more than 40% of homeowners in the U.S. own their properties free and clear. It wasn't always so easy. Before the Great Depression, mortgages had variable rates, and the full loan amount was due in just a few years. This increased the risk of people falling behind. Sure enough, by 1933, nearly 50% of American mortgages were at risk of foreclosure.
So, as part of the New Deal, President Franklin D. Roosevelt's administration created the first fixed-rate loans. It began with 15- and 20-year terms, with a 30-year mortgage following in 1948.
Today, more than 90% of mortgages are for 30 years, and for one big reason... affordability.
President Donald Trump has a new solution to that problem. But as I'll explain, it's a trap that folks should avoid if they can.
Here's how a longer mortgage term helps you afford to buy a home...
Let's say you get a $400,000 house with a 6.3% mortgage rate and a 20% down payment... Your monthly payment for a 30-year term would be around $2,000 a month – not including other costs like property taxes, homeowners-association ("HOA") fees, or insurance. But a 15-year term raises your monthly payment to around $2,750.
Lots of folks would rather spread their mortgage across a longer term than come up with an extra $750 every month.
The problem is, over the life of your mortgage, saving $750 a month costs you tens of thousands – even hundreds of thousands – of dollars more in interest.
For the 15-year mortgage, you'll pay about $175,000 in interest. But for the 30-year loan, that more than doubles to $393,000. That's $218,000 of your hard-earned cash going straight to the bank rather than into your home's equity.
That's why I always advise people to check out multiple loan terms and amounts to get a feel for what they'll really end up paying for a house. Because if you go for the 30-year mortgage, that $400,000 home comes out closer to $800,000...
Even with a 30-year mortgage, many folks can't afford a home. That's why the median age for a first-time homebuyer is 40. That's up from 33 years old just five years ago.
With a median home price around $410,000 and a median household income around $84,000, it's no wonder people can't buy homes.
Experts blame the current housing affordability crisis on lots of factors like limited new-home supplies, older generations holding on to their homes longer, home prices outpacing wage growth, and high interest rates.
Trump's solution follows the same philosophy that led to the boom in 30-year mortgages... stretching out the term to bring down the monthly payment.
This time, he's calling for a 50-year mortgage.
Look back at our example of a $400,000 home with a 20% down payment. A 50-year term would cost you about $1,755 a month, saving you $245 on your monthly payments. But you'd pay an astronomical $734,000 in interest over 50 years.
And remember... on a mortgage, you start off paying interest, not principal. That means that for decades, you're upside-down on your mortgage (owing more than the property is worth), rather than building equity. That can cause problems if you go to sell the home or need to take out a home-equity line of credit. If you took a 50-year loan today, most of your monthly payment would go toward interest until November 2064.
In the end, your $400,000 home really costs you more than $1 million... if you live long enough to pay it off.
Proponents argue that this longer-term loan gives homeowners flexibility to pay off the loan early. But considering that millions of Americans already enter retirement still paying a mortgage, that's an optimistic viewpoint.
The truth is that folks who need a lower payment are likely the ones who would be stuck with a 50-year term. They're the ones who'll spend decades owing much more than their house is worth... and spend a lifetime (and beyond) paying rent to a bank instead of a landlord.
Now, at least the bank can't increase your mortgage payments like a landlord jacking up your rent... force you to move out for any reason besides nonpayment... or control how you can change your home. And eventually, you get to stop paying the bank and enjoy homeownership free and clear.
These are reasons why owning a home is part of the American dream. They're good reasons. But you'll need to crunch more numbers than "What can I afford each month?"
If you know someone who is hoping to buy a home, or you're trying to buy one, I'd recommend using a mortgage calculator (like this one). It'll show you how the loan term and interest rate change the true cost of your home – what you'll actually pay over the life of your loan, not the loan amount.
Then decide if you're willing to spend $1 million for that $400,000 home.
What We're Reading...
- Something different: The new disease pandemic... ultra-processed food.
Here's to our health, wealth, and a great retirement,
Laura Bente, CFP®
November 20, 2025
