Consideration for 50 Year Loan Term

With rates on the rise and property value still high, mortgage companies start to consider 50 year terms to remain competitive.

Many people are being pushed out of the mortgage market due to soaring home prices. Though most home buyers go for the conventional 30 year term mortgage, the industry is beginning to consider a 50 year term. Longer terms lower the monthly payment, making the expensive homes more reasonable. The 10 year addition to the term makes a minimal difference in the monthly payment, but adds up to a lot at the end of the loan.

A median single family home is priced around $300,000. An average rate of 6.5% for a 30 year term would yield a monthly payment of around $1900. That would end up costing more than $680,000 at the end of the loan. The same rate of 6.5% for a 50 year term would be only about $1700 a month, but would cost you more than $1 million by the end of the loan. Banks are concerned that the loans would end up defaulting as a result of borrowers buying out of their price range, but the idea of the 50 year mortgage is still receiving attention in this highly competitive market.