U.S. President Donald Trump has suggested a 50-year mortgage plan, aiming to attract first-time American homebuyers looking for affordable housing options. However, many experts have criticized the idea of extending the typical 30-year loan term. In Canada, where mortgage periods have been shortened in recent years, the likelihood of adopting such a proposal is minimal.
Trump introduced the concept through a social media post comparing a 30-year mortgage associated with former President Franklin Delano Roosevelt to his proposed 50-year mortgage. Bill Pulte, the director of the Federal Housing Finance Agency, endorsed the idea, emphasizing the potential benefits of longer mortgages in enhancing housing affordability.
While Trump highlighted lower monthly payments as a key advantage, Joseph Gyourko, a real estate and finance professor, pointed out the downside of significantly higher interest payments over the extended loan duration. He cautioned against opting for a 50-year mortgage due to the substantial long-term interest costs involved.
Richard Kent Green, an expert on housing markets, echoed concerns over the slow equity buildup and increased default risks associated with extended mortgages. He viewed Trump’s proposal as more of a marketing tactic than a viable solution to housing challenges.
In Canada, mortgage processes differ significantly from the U.S., primarily driven by risk aversion practices. Unlike in the U.S., where mortgages are securitized and sold as investments, Canadian mortgages are backed by deposits, limiting the feasibility of extending amortization periods. Despite brief discussions on extending amortization in Canada, the trend has been towards shorter loan terms to mitigate risks and maintain financial stability.
While organizations like Mortgage Professionals Canada advocate for extending insured amortizations to 30 years, government hesitation persists due to concerns about market stability. The government’s cautious approach reflects a reluctance to introduce drastic changes that could artificially impact housing prices. However, gradual shifts towards longer amortization periods are anticipated, balancing affordability with system integrity.