“It will be just like the auto finance industry lengthening auto loan terms from 48 months to 60 months, then 72 months, then 84 months. Now, people making less than $50,000 a year are spending $75,000 on pickup trucks because they qualify for the monthly payment.”
Along those same lines, he believes that rather than people saving money with a 50-year mortgage, they would see themselves qualify for a larger loan rather than taking advantage of those potential savings.
“On a macro-level, a 50-year mortgage plan would be extremely inflationary,” he said. “It will cause millions of buyers, who only focus on monthly payment, to buy higher-priced homes than they should, creating more competition among buyers for the same home. We’ll be right back where we were in 2020-2021 with prices spiraling upward.”
James Hawkins, president of Golden Oak Lending, said the slow build of equity in a longer-term mortgage will also keep people stuck in homes.
“It’s a terrible idea,” Hawkins told Mortgage Professional America. “It will slow down the equity growth that makes owning a home so attractive. Buyers will be ‘locked in’ without the option to sell or refinance for at least 10 years, since you couldn’t recoup the costs of buying versus getting price appreciation. It would take 19 years to pay down 10% of your loan.”
